SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (Fee Required)
For the fiscal year ended June 30, 1995
_________ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange act of 1934
(No Fee Required)
For the Transition Period From _________ to __________
Commission file number 0-13150
CONCURRENT COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2735766
(State of Incorporation) (I.R.S. Employer Identification
Number)
2 Crescent Place, Oceanport, NJ 07757, (908) 870-4500
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $0.01 per share)
(Title of class)
Indicate by check mark whether Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
As of September 22, 1995, there were 30,562,613 shares
of Common Stock outstanding. The aggregate market value of
shares of such Common Stock (based upon the last sale price
of $2.0625 of a share as reported for such date on the Nasdaq
National Market System) held by non-affiliates (i.e., shares
held by other than entities identified as beneficial owners of more than
5% of the Common Stock and, without determining such status, including
shares held by directors and executive officers of the Company) was
approximately $56,503,579.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's Proxy Statement dated
October 1, 1995 in connection with Registrant's 1995 Annual
Meeting of Stockholders scheduled to be held on November 1,
1995 are incorporated by reference in Part III hereof.
PART I
Item 1. BUSINESS
(a) General Development of Business
Concurrent Computer Corporation ("Concurrent" or the "Company") is the
world's leading provider of high-performance real-time computer systems
and services, based on 1994 net sales of companies focused on providing
real-time systems. A "real-time" system must be able to meet guaranteed
rapid response times, acquire, process, store and display large amounts of
rapidly changing data as the changes occur, and have high system
reliability. Concurrent has nearly 30 years of experience in real-time
systems, including specific expertise in systems, applications software,
productivity tools and networking. Its systems provide real-time
applications for gaming, simulation, air traffic control, weather
analysis, multimedia and mission critical data services such as financial
market information.
(b) Financial Information About Industry Segments
The Company considers its products to be one class of products which
accounted for 51.4%, 56.0% and 60.3% of total revenues in the 1995, 1994
and 1993 fiscal years, respectively. Service and other operating revenues
(including maintenance, support and training) accounted for 48.6%, 44.0%
and 39.7% of total revenues in the 1995, 1994 and 1993 fiscal years,
respectively.
Financial information about the Company's foreign operations is
included in Note 12 to the financial statements included herein. The
Company's Tokyo-based subsidiary, a joint venture with Nippon Steel
Corporation, provides for marketing and sales in the Japanese market and
accounted for approximately $7.8 million in net sales (5.6%) for the 1995
fiscal year. The Company and Nippon Steel Corporation consider the
renewal of the joint venture agreement on an annual basis, which was
recently renewed through the end of fiscal year 1996.
(c) Narrative Description of Business
Concurrent's vision is to remain the premier supplier of high-
technology real-time computer systems and services through customer focus,
total quality and the rapid development of standard and custom products
with the objective of strong, profitable growth. Real-time systems
concurrently acquire, analyze, store, display and control data to provide
critical information within a predictable time as real world events occur.
Compared to general purpose computer systems, these unique real-time
capabilities are applicable to a wide range of application requirements,
including higher performance processing, higher data throughput,
predictable and repeatable response times, reliably meeting required
deadlines, consistently handling peak loads, and better balancing of
system resources. These benefits are useful for an ever increasing range
of existing and emerging markets.
Concurrent decentralized and restructured its operations in January
1994. The restructured organization focuses on the customer to achieve
its vision and objective of strong, profitable growth. To directly focus
on the customer, the Field Operations organization combines all sales and
services functions. Corporate Operations, composed of all other functions
(manufacturing, development and engineering, marketing, business
development, finance, law, human resources, quality and program
management), supports Field Operations in fulfilling the needs of the
customer. Both operations are enhanced through successful strategic
alliances, which are instrumental in achieving the objective of strong,
profitable growth. The restructuring has resulted in greater customer
focus, process improvement and more efficient allocation of resources. It
has also created an environment encouraging constant improvement
consistent with the Company's Basic Beliefs (a credo for a worldwide
organization operating to the highest standards of ethics, quality and
teamwork to generate profits and the long-term viability of the business).
Concurrent has nearly 30 years of real-time systems experience,
including specific design, development and manufacturing expertise in
system architectures, system software, application software, productivity
tools and networking. Concurrent's real-time systems are currently used
in host, client, server and distributed computing solutions, including
software controlled configurations to provide fault tolerance. The
Company sells its systems worldwide to end-users as well as to system
integrators, independent software vendors and value-added resellers. End
uses of the Company's systems include product design and testing;
simulation and training systems; telemetry and range systems; servers for
multimedia applications; power plant control and simulation; airline
reservation systems and cockpit communications; weather satellite data
acquisition and forecasting; intelligence data acquisition and analysis;
financial trading and services; lotteries and gaming; and automated mass
transit control.
The Company designs, manufactures, sells, and supports real-time
proprietary systems and standards-based open systems. It offers
worldwide hardware and software maintenance and support services
("Traditional Services"), for its products and for the products
of other computer and peripheral suppliers. The Company routinely offers
and successfully delivers long term service and support of its products
for up to fifteen years. The Company also has a long and successful
history of customizing systems with both specialized hardware and software
to meet unique customer requirements. Frequently in demand, these special
support services ("Professional Services") have included system
integration, performance and capacity analysis, and application migration.
As the computer market continues its shift in end-user demand from
proprietary to open systems, the Company has developed a strategy to
adjust service offerings to those more appropriate for open systems, while
maintaining support for proprietary systems. The Company's strategy also
strikes a balance between appropriate upgrades for proprietary system
offerings while predominantly investing in the open-system computing
platforms. The Company is also leveraging its investment in research and
development and enhancing market penetration through strategic alliances.
In October 1993, the Company introduced its new MAXION Systems.
Incorporating industry standards throughout its design, these
multiprocessor systems were based on the new MIPS R4400 reduced
nstruction set computer (RISC) microprocessor. These new systems
supported Concurrent's real-time enhanced UNIX operating system. Based
upon the UNIX SVR4.2 MP multiprocessor operating system and working in
partnership with the Novell UNIX Systems Group, this operating system
provides superior resource utilization and real-time extensions for a
variety of applications while supporting and complying with all major
operating system standards. Demonstrating its continued commitment to its
proprietary system customers, the Company also introduced in October 1993,
a new proprietary high-end Series 3200 multiprocessing system, the Model
3200-850. This new system is an upgrade to Concurrent's Model 3280 MPS
and MicroFive MPS systems. Full-scale production shipments of the new
MAXION system and the new Model 3200-850 system began on schedule during
the quarter ended March 31, 1994.
Markets
The Company focuses its business on its installed base of proprietary
systems and strategic target markets for its open systems. Although its
installed base of proprietary systems is currently its largest market,
accounting for approximately 65% of total systems sales for fiscal year
1995, the growth of the business and the long-term financial performance
of the Company will depend largely on its ability to continue to develop
and market industry-leading real-time open systems such as its MAXION
multiprocessor system. The Company believes the MAXION system has
strengthened its competitive position. The Company is focusing on the
target markets because of their growth potential for real-time open
systems and because of Concurrent's experience in meeting customer
requirements.
Concurrent's strategic target markets include its proprietary systems
installed base, simulation, weather, wagering and gaming, measurement and
control, command, control, communications and intelligence (C3I) and
multimedia. Summaries of these markets follows:
Series 3200 Systems Installed Base. Concurrent's reputation in the
industry is largely attributable to its proprietary real-time computing
systems. Now in their fifth generation, these proprietary systems meet
customers' needs in extremely demanding real-time environments. Many of
the applications using the Series 3200 systems, including the U.S.
Department of Commerce's Next Generation Radar (NEXRAD) program, are
unique with long life cycles and "mission critical" demands and are the
result of a significant investment in application software by the
customer. The Company's goal is to work with these customers so that they
can maximize their return on investment and to assure them a competitive
total cost of ownership through Professional Services and products that
provide compatible upgrade paths. The Company considers its Series 3200
customer base a critical market and is committed to meeting the needs of
this installed base regardless of whether the customer's application is
related to the target niche markets listed below.
Simulation. Concurrent is a recognized leader in real-time systems
for simulation. Primary applications include trainers/simulators for
operators in commercial and military aviation, vehicle operation and power
plants, scenario trainers for battle management, mission planning and
rehearsal, engineering design simulation for avionics and automotive labs
and modeling systems for wargaming and synthetic environments. The
Company's MAXION system architecture is uniquely positioned to satisfy the
trend in the simulation and training industry towards a networked and
interactive environment in which training simulators are networked with
other training simulators to represent a distributed interactive
environment. MAXION systems are being used today by customers to create
this networked and interactive simulation and training environment.
Weather. Weather analysis and forecasting require the ability to
gather, analyze and display continuous flows of information from
simultaneous sources and distribute them electronically. Primary
applications include environmental analysis and display, doppler weather
radar, and numerical weather prediction. This market demands real-time
computing solutions because there is little or no margin for error where
lives and property are at risk. The Company provides the computer systems
which power the computing requirements for the Department of Commerce's
Next Generation Radar (NEXRAD) weather program. The
Company's success in this market has led to significant sales with the
U.S. Navy and the U.S. Air Force.
Wagering and Gaming. Concurrent is a leading provider of systems for
the wagering and gaming industry. Concurrent has provided the processing
systems for the wagering and gaming industry's largest provider of public
lottery systems, the majority of tabulator (off-track betting)
systems in Australia and Asia/Pacific and for large scale casino systems
such as Keno. In these applications, the number of simultaneous users is
measured in thousands with data analysis required in real-time. High
system availability is assured using Concurrent's Fault Tolerant Network
Computing remote network-based and redundant system architecture.
Measurement and Control. Concurrent is a leading supplier of systems
to users requiring simultaneous multi-channel acquisition, processing,
display and archiving of analog and digital signals at throughput rates in
excess of 1 million samples per second, in stand-alone or networked
environments. Engineers and scientists use the systems to collect,
control, analyze and distribute test data from multiple high speed data
sources. Concurrent, together with its value-added resellers, provides
both programming development tools and complete solutions for applications
such as wind tunnel engine and turbine testing, vibration control, range
and telemetry, missile design, vehicle design, seismic exploration and
underwater acoustics. The Company's balanced system performance combined
with graphics and data acquisition provide the ideal solution for these
applications.
Command, Control, Communications and Intelligence (C3I). Concurrent
is a leading supplier to a broad range of C3I applications requiring the
ability to ingest data, analyze the data for assistance in decision making
and dissemination of commands for response. Primary applications include
command and control, mission planning, signal intelligence and analysis,
air traffic control, air defense and message processing. Examples of
Concurrent's success in this market include systems used by the German and
Spanish Governments for air traffic control, and systems used by the U.S.
National Security Agency for Signal Intelligence and Analysis.
Multimedia. Concurrent has identified the network server resident in
multimedia interactive applications as an emerging market where its MAXION
multiprocessor systems offer unique advantages. Concurrent's strategy is
to position itself as a supplier of server technology for these
interactive, time critical video/image on demand applications. This
horizontal strategy focuses primarily on business applications such as
distance learning, entertainment and services systems for hotels and
airlines, and telemedicine. These applications require reliable delivery
of multiple streams of high quality video and simultaneous servicing of
interactive requests from multiple users. For these requirements, the
MAXION system technology offers unique advantages over competing systems.
Products and Services
The Company considers its products and services a total package to
provide complete value-added real-time solutions. The Company offers two
types of systems, proprietary and open, as well as Traditional Services
and Professional Services.
Series 3200 Real-Time Proprietary Systems. The Company has a large
installed base of its Series 3200 real-time proprietary systems. A
central feature of the Company's strategic plan is to work closely with
these existing proprietary system users to meet their needs for
improvements and upgrades and, should they decide to switch to a real-time
open system, to be their vendor of choice for the migration. The Series
3200 system product line uses the Company's proprietary OS/32 operating
system and processor technology. Below is a list of the Company's current
proprietary systems product offerings. Performance currently ranges from
3.9 to 70 MIPS (million instructions per second) and price ranges from
$55,000 to approximately $1.3 million. The Company's 3200-850 system was
introduced in October 1993 with the first production units shipped on
schedule in the quarter ended March 31, 1994.
Series 3200 Product Line
Performance Typical Price
Model (MIPS)* Range
3200-400/A 3.9 $55,000
3200-400 3.9 $65,000
3200-600 6.8 to 35.6 $160,000 to $585,000
3280 6.4 to 35.6 $300,000 to $900,000
3200-650 13.6 to 35.6 $230,000 to $570,000
3280E 6.4 to 70 $360,000 to $1,350,000
3200-850** 13.6 to 35.6 $330,000 to $810,000
*MIPS - Million Instructions Per Second
**MIPS rate is the same but delivered performance increases dramatically
over 3200-650
UNIX-Based Real-Time Open Systems. The emergence of industry-standard operating
systems, high-performance microprocessors and networking technology has
dramatically lowered the cost of providing real-time open
systems to the marketplace, thus greatly expanding the universe of
potential real-time systems purchasers. The Company plans to capitalize
on this trend by focusing on its target markets as well as through
strategic alliances with third parties to bring to market new solutions
and software applications for new and existing customers. The current
product line uses the Company's real-time UNIX (RTU) operating system
with the processor technology identified below. Performance currently
ranges from 3 to 460 SPECmarks with typical price ranging from $22,000 to
approximately $170,000. The MAXION multiprocessor system, the first model
of the Company's new next-generation open systems using the MIPS R4400
microprocessor, was introduced in October 1993.
Open Systems Product Line
Performance Typical Price Processor
Model (SPECMarks)* Range Technology
7150 11 to 21 $24,725 to $ 68,725 MC68040
7250 11 to 21 $36,495 to $ 75,505 MC68040
7550 11 to 21 $44,295 to $143,305 MC68040
7552 11 to 21 $52,495 to $151,505 MC68040
MAXION 9150 115 to 345 $27,495 to $68,495 MIPS R4400
MAXION 9250 115 to 460 $48,795 to $108,295 MIPS R4400
MAXION 9552 230 to 460 $117,000 to $170,000 MIPS R4400
* SPECMarks - Independently developed industry standard benchmark.
Traditional Services. One of the largest benefits to the Company of
its extensive installed customer base is the large and generally
predictable revenue stream generated from Traditional Services. While
Traditional Services revenue has declined and is expected to further
decline as a result of the industry shift to open systems, the Company
expects this business to be a significant source of revenues and cash flow
for the foreseeable future. The Company offers a variety of service and
support programs to meet the customer's maintenance needs for both its
hardware and software products. The Company also offers contract service
for selected third party equipment. The service and support programs
offered by Concurrent include rentals and exchanges; diagnostic and repair
service; resident service; and preventive maintenance. The Company
routinely offers long-term service and support of its products for up to
fifteen years.
Professional Services and Custom Engineering. Throughout the
Company's history, it has supported its customers through Professional
Services and Custom Engineering support efforts. This remains true today
as customers transition to open systems and manage their costs through the
increased use of outsourcing. This is especially true for the time
constrained, cost sensitive or mission critical requirements of real-time
applications. Custom Engineering frequently assists customers in
designing their application systems. In many cases, the Company also
provides custom and integration engineering services to implement the
design. This may include custom modifications to the Company's products
or integration of third party interfaces or devices into the Company's
systems. Many customers use Professional Services to migrate existing
applications from earlier generations of the Company's or competitor's
systems to the Company's state-of-the-art systems. Professional Services
also include classroom and on-site training, system and site performance
analysis, and multiple vendor support planning. Although the total
revenues associated with any single Professional Services or Customer
Engineering effort may be small in comparison to total revenues, the
positive effect on overall revenue production and increased customer
satisfaction is an integral part of the business plan of the Company.
Systems and Technology
Concurrent has made a considerable investment in developing its
product lines and today offers computer systems satisfying a broad range
of high-performance requirements for real-time applications. While
maintaining a competitive capability and continued enhancement of the
Company's proprietary product line for a still significant installed base,
the primary investments have been in the evolution of the open systems
product line. The Company has delivered a unique balance of supporting
industry standards while providing innovative superiority in key
architectural issues. Below is a summary of some of the features of
Concurrent's real-time systems and technology.
Hardware Architecture. For almost three decades, Concurrent has
demonstrated its ability to develop and deliver state-of-the-art system
architectures to meet the increasing demands of real-time applications.
Concurrent has evolved both proprietary and open system architectures,
delivering pioneering work in symmetrical multiprocessing architectures.
Over the past several years, all computer companies have been challenged
to use a wide range of evolving industry-standard components and
technologies to continuously achieve exceptional price/performance to
remain competitive. As today's microprocessor components deliver
unparalleled increases in performance, the traditional bus multiprocessor
architecture (used previously by Concurrent and still used by most
computer vendors) is having increasing difficulties avoiding bottlenecks
and resource contentions that rob applications of performance. The
Company's MAXION Systems use an innovative architecture to achieve not
only high performance but also the industry's most predictable and
scaleable systems on the market. The first generation of MAXION Systems
(which started production shipments in 1994 and were subsequently upgraded
to use faster clock rates in 1995) are already used in a wide range of
demanding applications. The second generation of MAXION Systems is
scheduled for introduction during 1996.
System Software. The Company is recognized for its continuous
development and evolution of real-time operating systems and other system
software for almost three decades. An active participant in the
development of industry standards for real-time computing, the Company
also supports features well advanced beyond system software available on
general purpose systems on the market. User's of the Company's systems
automatically benefit from these capabilities while developing programs in
industry-standard software development environments and using third-party
software tools and products. Special system tools are also provided to
allow applications to be tuned to fully utilized the maximum performance
from each system.
I/O Subsystems. As microprocessor chips performance ratings increase
dramatically, the demands on the I/O subsystem to supply the program loads
and data for applications to take advantage of these higher performance
chips increases proportionally. Although the emergence of industry-
standard I/O buses has dramatically increased the number of interfaces and
peripherals available while decreasing the cost, these same standards
dictate the maximum performance any single bus can deliver. The MAXION
Systems are designed to allow the user to select the number of I/O buses
required. This flexibility was further increased by doubling the number
of possible I/O buses as the result of a new extension for the MAXION
Systems released in 1995.
Distributed Computing & Networking. Concurrent's computer systems
have been used as server systems in heterogeneous networks (i.e., with
Concurrent and non-Concurrent computers) for decades. To support this
capability, Concurrent systems continue to support the most widely
demanded networking protocols and features. These include the Company's
Fault-Tolerant Networked Computing (FTNC) support, which allows user's to
use and manage resources on a network to design a solution that is
scaleable to the level of fault tolerance required for a specific
application. Distributed computing and networking support continue to be
expanded as communications requirements evolve, including such
additions as Asynchronous Transfer Mode (ATM) support in 1995. The unique
demands of real-time applications also push Concurrent to support special
capabilities, such as the Distributed Interactive Simulation (DIS) network
for military distributed simulation and training.
Data Acquisition. The Company continues its heritage of integrated
data acquisition systems. Demonstrated to be superior to other systems at
acquiring, analyzing and displaying high volumes of complex data, these
capabilities continue to support applications such as wind tunnel
analysis, engine test facilities, satellite data acquisition, range
telemetry, and intelligence gathering and analysis.
Graphics. Powerful graphics are essential in many real-time
applications. The Company supports integrated graphics processors and
industry-standard graphics software, such as X-Windows, MOTIF, and OpenGL.
Many third party graphics tools and applications are also supported on the
systems. In many applications, however, the demands for graphics become
so great that the Company has helped design and implement graphics
topologies using real-time processing servers coupled with high-
performance graphics servers to meet even the most demanding needs of
real-time applications without encountering the system bottlenecks
prevalent on implementations using only multiprocessing graphics servers
of competitors.
Productivity Tools. During 1995, the Company has implemented a
powerful software development environment that has addressed a weaker
product offering in this area. Using Hewlett Packard's SoftBench as a
software infrastructure, a robust set of tools has been assembled and
fully integrated with a graphics user interface to provide outstanding
support for C, C++, FORTRAN and Ada. Additional tools to facilitate
debugging and performance tuning across multiple processors are also a
part of the development environment. Specialized tools for specific
market requirements, such as the Simulation Workbench (which simplifies
the design, development, testing and production of simulations through a
powerful graphical interface), round out the software development
environment focused on unparalleled productivity and preservation of
software investments across multiple generations of computer systems.
Management
Executive officers of Concurrent are elected by the Board of Directors
to hold office until their successors have been chosen and qualified or
until earlier resignation or removal. Set forth below are the names,
positions and ages of the Company's executive officers as of the September
28, 1995 Form 10-K filing date:
Director or
Executive
NAME POSITION AGE Officer
John T. Stihl Chairman of the Board, 62 1991
President,Chief Executive
Officer
George E. Chapman Vice President, 61 1994
International Field
Operations
David S. Cowie Vice President,
Development and Engineering 48 1993
Kevin J. Dell Vice President, General 39 1993
Counsel and Secretary
Robert S. Kovarcik Vice President, 47 1994
Manufacturing & Logistics
Roger J. Mason Vice President, Finance and 46 1994
Treasurer, Chief Financial
Officer
Charles R. Maule Vice President, Marketing 44 1994
and Strategy
C. Dennis McWatters Vice President, North 49 1994
American Field Operations
David L. Vienneau Vice President, Human 41 1994
Resources
John T. Stihl, Chairman of the Board, President and Chief Executive
Officer. Mr. Stihl has served as Chairman of the Board, President and
Chief Executive Officer since August 1993. He joined the Company in May
1991 as Executive Vice President and was promoted to President and Chief
Operating Officer less than one year later in April 1992. He joined the
Company from G&H Technology, Inc., a division of Penn Central Corporation,
which designs, develops, manufactures and markets electromechanical
components for the defense and aerospace industries where he served as
President and Chief Executive Officer from 1988 after retiring as a Major
General from the United States Air Force. His experience includes over 20
years in high level executive positions with the United States Air Force
managing large scale telecommunications, computer and air traffic control
operations, including from 1986 to 1988, commander (CEO) of the 58,000
persons worldwide, Air Force Communications Command, headquartered at
Scott Air Force Base, Illinois. Prior to his retirement, he had been an
officer in the United States Air Force since 1955.
George E. Chapman, Vice President, International Field Operations. Mr.
Chapman was elected to this position in November 1994. He previously
served as Vice President, Marketing since January 1994. He joined
Concurrent in 1992 as Director, Business Development for Weather and
Airspace Management. In 1988, after retiring as a Brigadier General from
the United States Air Force, he joined Lockheed Corporation's Austin
Division as Senior Staff Engineer working toward the worldwide commercial
application of high technology systems developed for the U.S. Government.
In December 1989, he received an appointment as Executive Director to the
newly legislated Texas Workers Compensation Commission. His career with
the U.S. Air Force spanned 36 years, with the last six years devoted to
leadership of a 5,000 person organization responsible for the long-range
technology, investment and training requirements for the nation's weather
prediction and warning capability supporting U.S. forces throughout the
world.
David S. Cowie, Vice President, Development and Engineering. Mr.
Cowie was elected to this position in August 1993. He joined the Company
in 1982 as Senior Manager, Commercial Systems Software Development and
advanced to Director, European Software Development in 1983. In 1991, Mr.
Cowie was promoted to the position of Senior Director, Systems
Engineering. Prior to joining the Company, he held systems development,
project management, and systems consultancy positions with ICL Systems,
Gemini Computer Systems, and ICL Dataskil.
Kevin J. Dell, Vice President, General Counsel and Secretary. Mr.
Dell was elected to the position of Vice President, General Counsel and
Assistant Secretary in August 1993 and advanced to the position of
Secretary in November 1994. As Concurrent's chief legal officer, he is
responsible for the Company's legal and contractual requirements
worldwide. Mr. Dell joined the Company in 1987 as Senior Corporate
Attorney and advanced to Assistant General Counsel in 1988. Prior to
joining the Company, he was an associate at the law firm of Finley,
Kumble, Wagner, Underberg, Manley, Myerson & Casey in New York.
Robert S. Kovarcik, Vice President, Manufacturing and Logistics. Mr.
Kovarcik was elected to this position in June 1994. He joined Concurrent
in 1991 as Director, Program Management. Prior to joining Concurrent, he
served for 12 years in management positions with several high technology
companies including Vice President/General Manager of the Cubic Division
of Cubic Corporation, a public manufacturer of electro-optical equipment;
Vice President/General Manager of New Brunswick Scientific, Inc., a public
manufacturer of bio-technology processing equipment; and Program Director
of ITT, a public diversified electronics company.
Roger J. Mason, Vice President, Finance and Treasurer, Chief Financial
Officer. Mr. Mason joined the Company in this position in October 1994.
Prior to joining the Company, he served as Chief Financial Officer and
Treasurer at Integral Peripherals Inc. a disk drive manufacturer. From
1981 to 1991, he held senior executive positions at Maxtor Corporation, a
publicly held disk drive manufacturer, MiniScribe Corporation, a publicly
held disk drive manufacturer whose assets were acquired by Maxtor
Corporation and Ironstone Group, Inc., a publicly held holding company.
His experience also includes public accounting with Coopers & Lybrand and
Honey, Perriam & Company.
Charles R. (Rick) Maule, Vice President, Marketing and Strategy. Mr.
Maule was elected to this position in November 1994 after joining the
Company in October 1994 as Vice President, Strategy and Business
Development. Prior to joining the Company he served for two years as
Director, Business Development and Director, Commercial Programs at
Lockheed Missiles and Space Company. Prior to that he spent 14 years with
Harris Corporation, Computer Systems Division in a number of senior
positions, including Vice President, Simulation and Training, and Vice
President, Development and Engineering.
C. Dennis McWatters, Vice President, North American Field Operations.
Mr. McWatters was elected to this position in November 1994. He joined
the Company in November 1993 as Director of OEM and Major Account Sales.
Prior to joining the Company he served as Vice President, Data Acquisition
of the Harris Corporation, Computer Systems Division. Mr. McWatters has
also held senior positions at Encore and Gould Computer Systems, Jim
Lemick & Associates and Digital Equipment Corporation. He also served as
a pilot in the United States Marine Corps.
David L. Vienneau, Vice President, Human Resources. Mr. Vienneau was
elected to this position in May 1994. He is also President and founder of
Performance Based Solutions, a human resources consulting services
company. Prior to forming Performance Based Solutions, Mr. Vienneau was
Director, Human Resources at Akzo America, Inc., a diversified
manufacturer of chemical products, and Director, Compensation and Benefits
at Penn Central Corporation, which designs, develops, manufactures and
markets electromechanical components for the defense and aerospace
industries.
Sales and Service
The Company sells its systems in key markets worldwide through direct
field sales and services offices as well as through a network of software
suppliers, distributors and system integrators. The Company does not
believe the loss of any particular distributor or system integrator would
have a material impact on the Company's operating results. The Company's
principal customers are original equipment manufacturers (OEMs), systems
integrators, independent software vendors (ISVs) and value-added resellers
(VARs) who combine the Company's products with other equipment or with
additional application software for resale to end-users. Collectively,
these customers account for approximately 60-70% of sales, with sales to
end-users accounting for the remaining 30-40%. Several major customer
accounts historically have provided a stable and generally predictable
contribution to revenues.
Servicing the Company's large installed base, particularly its
proprietary systems, is an important element in Concurrent's business
strategy and generates significant revenue and cash flow to the Company.
Total service revenues in fiscal year 1995 were approximately $68 million
(48.6% of total revenues). Approximately 86% of Traditional Services
revenues are generated from maintenance and support contracts which
generally run from one to three years with annual renewal provisions. The
Company's existing installed base of proprietary systems also represents
an opportunity for incremental sales of both systems and Traditional and
Professional Services.
No customer, other than the U.S. Government, has accounted for 10% or
more of Concurrent's net sales in the three fiscal years ended June 30,
1995. For the 1995 fiscal year, approximately $39.2 million of the
Company's revenues were attributable directly or indirectly to entities
related to branches of the U.S. Government. This amount represented
approximately 28% of the Company's worldwide revenues, compared to 31% and
29% for the 1994 and 1993 fiscal years, respectively. Sales to Unisys Corp.,
as prime contractor, under the NEXRAD program are considered sales to the U.S.
Government. However, the Company's revenues related to sales
to the U.S. Government are derived from various Federal agencies, no one
of which accounted for more than 5% of total revenues. The NEXRAD program
contributed approximately $17.5, $23 and $35 million in revenues in fiscal
years 1995, 1994 and 1993, respectively. In an effort to reduce total
program costs, sales of spare parts by Concurrent under the program are
now being made directly to the Government. The program is largely
completed and no significant revenue is planned for future periods. U.S.
Government contracts and subcontracts generally contain provision for
cancellation at the convenience of the Government. Substantially all of
the Company's U.S. Government related orders are subcontracts and most are
for standard catalog equipment which would be available for sale to others
in the event of cancellation. To date, there have been no cancellations
that have had a material impact on the Company's business or results of
operations.
Research and Development
During the three fiscal years ended June 30, 1995, Concurrent invested
a total of over $70 million in research and development which, as a
percentage of sales, represented 13.9%, 13.3% and 12.2% in fiscal years
1995, 1994 and 1993, respectively. Research and development investment was
made across all of Concurrent's key technology areas for both proprietary
systems and open systems. New networking products, graphics, data
acquisition sub-systems, enhancements to the proprietary OS/32 and UNIX-
based operating systems, and three new proprietary Series 3200 systems
(32-400, 32-600 and 32-850 Series) and the Series 7000 and MAXION open
computer systems and other products resulted from this investment.
Although in terms of absolute dollar amounts total research and
development investment has declined over the past several years, the
Company expects a greater return on its total research and development
investment for two reasons. First, research and development investment is
focused solely on products and applications for its target markets.
Second, the Company's increasing use of joint research and development and
technology sharing arrangements is expected to leverage the Company's
investment in research and development. The Company's strategy is to
acquire or co-develop technology when the market requires parity with
competitive technology and to develop technology internally when market
leadership is possible. This strategy is expected to give the Company
greater flexibility in meeting the technology requirements of its
customers and to allow it to provide increasingly higher performance
products by focusing its research and development resources where it can
add the most value.
Manufacturing Operations
The Company's manufacturing operation is located at its Oceanport, New
Jersey facility. The Oceanport facility has approximately 285,000 square
feet of space of which approximately 85,000 square feet is used for
manufacturing. Utilization of manufacturing capacity was approximately 70%
based on a two shift operation in fiscal year 1995. Management believes
that the manufacturing capacity available at the Oceanport facility could
be significantly increased (with minimal capital spending) to meet
increased manufacturing requirements either by raising the utilization
rate or by adding assembly personnel on its first and second shift or by
adding a third shift. The Company outsources several subassembly
operations, including all printed circuit board subassemblies, which has
resulted in significant cost savings. The Company's manufacturing
operations are now limited to systems assembly, systems integration and
systems test. Extensive testing and burn-in conditioning is performed at
the board and subassembly levels and at final system integration. Because
of the wide range of product configurations, final assembly and test
usually occur when a specific customer order is being prepared for
shipment. As a result of the successful outsourcing activities and
significant reductions in manufacturing inventories, the Oceanport
manufacturing operations have been consolidated into a focused factory
layout which includes assembly cells and a focused warehouse to minimize
non-value-added material movement, improve manufacturing quality, and
reduce assembly cycle times.
Sources of Supply
Concurrent has multiple commercial sources of supply throughout the
world for most of the materials and components it uses to produce its
products. In some cases, components are being purchased by the Company
from a single supplier to obtain the required technology and the most
favorable price and delivery terms. Although the Company has not
experienced any materially adverse impact on its operating results as a
result of a delay in supplier performance, any delay in delivery of
components may cause a delay in shipments by the Company of certain
products. The Company estimates that a lead time of up to 16-24 weeks may
be necessary to switch to an alternate supplier of certain custom
application specific integrated circuits and printed circuit assemblies. A
change in the supplier of these circuits without the appropriate lead time
would result in a delay in shipments by the Company of certain products.
Since revenue is recognized typically upon shipment, any delay in shipment
may also result in a delay in revenue recognition, possibly outside the
fiscal period originally planned, and, as a result, may adversely affect
the Company's financial results for that particular period. A transition
from one single supplier to another could have a similar impact. The
Company carefully monitors the ability of any single supplier to timely
meet the Company's requirements, including the supplier's financial
condition. Management believes it has good relationships with its
suppliers, including alternative suppliers, and expects that adequate
sources of supply for components and peripheral equipment will continue to
be available.
Competition
The shift from proprietary systems to standards-based open systems is
expected both to expand market demand for systems with performance
characteristics previously only found in proprietary real-time computing
systems and to increase competition, making product differentiation a more
important factor. Due in part to the range of performance and applications
capabilities of its products, the Company competes in various markets
against a number of companies, many of which have greater financial and
operating resources than the Company. Competition in the high performance
real-time computing systems and applications market comes from five
sources: (1) major computer companies that participate in the real-time
marketplace by layering specialized hardware and software on top of or as
an extension of their general purpose product platforms--these are
principally Digital Equipment Corporation and Hewlett-Packard Corporation;
(2) companies like Concurrent that target the high performance, real-time
market with specialized systems designed uniquely for real-time
application--Harris Computer Systems Corporation is a competitor in
certain markets in this category; (3) other computer companies that
provide solutions for applications that address a specific characteristic
of real-time, such as fault tolerance or high-performance graphics--these
computer companies include Silicon Graphics Inc., Stratus Computer, Inc.,
and Tandem Computers, Inc.; (4) general purpose computing companies that
provide a platform on which third party vendors add real-time
capabilities--these computer companies include International Business
Machines Corp. and Sun Microsystems, Inc.; and (5) single board computer
companies that provide board-level processors that are typically
integrated into a customer's computer system--these computer companies
include Force, MIZAR and Motorola, Inc.
Intellectual Property
The Company relies on a combination of contracts and copyright,
trademark and trade secret laws to establish and protect its proprietary
rights in its technology. The Company distributes its products under
software license agreements which grant customers perpetual licenses to
the Company's products and which contain various provisions protecting the
Company's ownership and confidentiality of the licensed technology. The
source code of the Company's products is protected as a trade secret and
as an unpublished copyright work. In addition, in limited instances the
Company licenses its products under licenses that give licensees limited
access to the source code of certain of the Company's products,
particularly in connection with its strategic alliances. Despite
precautions taken by the Company, however, there can be no assurance that
the Company's products or technology will not be copied or otherwise
obtained and used without authorization. In addition, effective copyright
and trade secret protection may be unavailable or limited in certain
foreign countries. The Company believes that, due to the rapid pace of
innovation within its industry, factors such as the technological and
creative skills of its personnel are more important to establishing and
maintaining a technology leadership position within the industry than are
the various legal protections of its technology.
Concurrent has entered into licensing agreements with several third-
party software developers and suppliers. Generally, such agreements grant
to the Company non-exclusive, worldwide licenses with respect to certain
software provided as part of computers and systems marketed by the Company
and terminate on varying dates. For example, Concurrent is licensed by
Novell, Inc. to use and sublicense Novell's UNIX operating system in the
Company's computer systems. The Company has entered into licensing
agreements with Novell for internal use of source code version of the UNIX
operating system and for the sublicensing of binary version of the UNIX
operating system. Both licenses are perpetual unless terminated in
accordance with the notice provisions and address versions of the UNIX
operating system through and including System V, Release 4.0 (SVR4). The
Company pays a royalty to Novell for each computer system shipped using
the UNIX operating system equal to approximately 2% of the list price of
the basic (minimum) configuration of the system.
Employees
As of June 30, 1995, the Company employs approximately 825 employees
worldwide of whom approximately 500 were employed in the United States,
compared to approximately 1,250 and 1,600 employees worldwide at June 30,
1994 and 1993, respectively. The Company's employees are not unionized.
Backlog
Generally, the Company records in "backlog" computer orders which it
is anticipated will be shipped during the subsequent six months or, where
special engineering is required, in the subsequent 12 months. The backlog
of unfilled computer systems orders was approximately $9.8 million on
June 30, 1995 compared to approximately $21.9 million a year earlier.
While the Company anticipates shipping the majority of backlog during
subsequent periods, the amount of orders in backlog is not necessarily a
meaningful indicator of business trends for the Company because orders may
be canceled before shipment or rescheduled for a subsequent period which
may affect the amount of backlog that may be realized in revenue in any
succeeding period. In addition, with the increasing emphasis on open
systems, more customers are placing orders within the quarter where
delivery is expected thus backlog is a less meaningfull measurement of
anticipated revenue.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales
A summary of net sales (consolidated net sales reflects sales to
unaffiliated customers), attributable to Concurrent's foreign and domestic
operations for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively, is presented at Note 12 to the financial statements of the
Registrant included herein.
Item 2. PROPERTIES
Listed below are Concurrent's principal facilities as of June 30, 1995.
Management considers all facilities listed below to be suitable for the
purpose(s) for which they are used, including manufacturing, research and
development, sales, marketing, service and administration. Management
believes that its Oceanport, New Jersey manufacturing facility has
sufficient capacity to meet the Company's projected manufacturing
requirements.
Approximate
Owned or Expiration Floor Area
Location Principal Use Leased Date of Lease(square ft)
2 Crescent Place Manufacturing/ Owned (1) - (1) 285,000
Oceanport, NJ Service/Marketing
Corporate Headquarters
106 Apple Street Held for disposition Owned - 132,000
Tinton Falls, NJ
One Technology Way Research & Leased 1998 88,500
Westford, MA Development/Marketing
227 Bath Rd., Sales/Research & Leased 1996 (2) 36,000
Berkshire Development
Slough, England
(1) The Company has entered into a contract for the sale and
leaseback of its Oceanport, New Jersey facility expected to be
completed in the quarter ending December 31, 1995.
(2) Renewable at the Company's option through March 1998.
In addition to the facilities listed above, Concurrent also leases
space in various domestic and international industrial centers for use as
sales and service offices and warehousing and also engages in certain
research and development activities at a Florida facility. The Company has
placed the Tinton Falls facility for sale.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Company
or any of its subsidiaries is a party or to which any of the Company's or
any of its subsidiaries' property is subject. To Concurrent's knowledge
there are no material legal proceedings to which any director, officer or
affiliate of Concurrent, or any owner of record or beneficially of more
than five percent of Common Stock, or any associate of any of the
foregoing, is a party adverse to Concurrent or any of its subsidiaries.
No material legal proceedings were terminated during the fourth quarter of
the fiscal year ended June 30, 1995.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Common Stock is currently authorized for quotation under the
symbol "CCUR" on the NASDAQ National Market System. The following table
sets forth the high and low closing bid prices for the Common Stock for
the periods indicated, as reported in published financial journals or
otherwise available from NASDAQ. The price quotations below reflect
interdealer prices, without retail mark-up, mark-down or commission and
may not necessarily reflect actual transactions.
High Low
Fiscal Year 1994:
First Quarter 3 9/16 2 1/2
Second Quarter 3 1/4 1 1/2
Third Quarter 2 5/16 1
Fourth Quarter 2 3/8 1 3/8
Fiscal Year 1995:
First Quarter 2 7/16 1 15/16
Second Quarter 1 15/16 1 1/4
Third Quarter 1 5/8 25/32
Fourth Quarter 2 1/2 3/4
Fiscal Year 1996:
First Quarter
(through September 22, 1995) 2 21/32 1 1/2
As of September 22, 1995, there were 30,562,613 shares of Common
Stock outstanding, held of record by approximately 2,500 stockholders.
The Company has never declared or paid any cash dividends on its
capital stock. The Company's present policy is to retain earnings to
finance expansion and growth, and no change in the policy is anticipated.
In addition, the terms of the Company's loan agreement with its lender
prohibit the Company from payment of cash dividends on its capital stock.
As a result, it is not anticipated that cash dividends will be paid in the
foreseeable future.
On July 31, 1992, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of Common
Stock and then outstanding Convertible Preferred Stock of the Company to
stockholders of record at the close of business on August 14, 1992. Each
Right entitles the registered holder to purchase from the Company one one-
hundredth of a share of Series A Participating Cumulative Preferred Stock,
par value $.01 per share, at a cash purchase price of $30.00 per Right,
subject to adjustment, which become exercisable upon the occurrence of
certain events. (See Note 16 of Notes to Consolidated Financial
Statements.)
Item 6. SELECTED FINANCIAL DATA
This information is set forth in the Selected Financial Data section of
the Consolidated Financial Statements in Item 8.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
This information is set forth in the Management's Discussion and
Analysis of Financial Conditions and Results of Operations section
of the Consolidated Financial Statements in Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements and supplementary data for
Concurrent are attached and incorporated into Item 8.
Report of Independent Accountants
Consolidated Statements of Operations for the years ended June 30, 1995,
1994 and 1993
Consolidated Balance Sheets as of June 30, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended June 30, 1995,
1994 and 1993
Consolidated Statements of Stockholders' Equity (deficiency) for the years
ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Selected Financial Data
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Registrant hereby incorporates by reference in this Form 10-K
certain information contained under the caption "Election of Directors" in
Registrant's Proxy Statement to be dated October 1, 1995 in connection
with its Annual Meeting of Stockholders to be held on November 1, 1995
("Registrant's 1995 Proxy Statement").
(b) Identification of Executive Officers
The information called for hereunder is included in Part I of this
Form 10-K under the caption "Executive Officers of Registrant".
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
There is no family relationship between any director and/or executive
officer of the Company.
(e) Business Experience
The Registrant hereby incorporates by reference in this Form 10-K
certain information contained under the caption "Election of Directors" in
Registrant's 1995 Proxy Statement with respect to the business experience
of Registrant's directors. The information called for by this Item 10
with respect to executive officers of Registrant is included in Part I of
this Form 10-K under the caption "Management".
(f) Involvement in Certain Legal Proceedings
The Registrant hereby incorporates by reference in this Form 10-K
certain information contained under the caption "Election of Directors" in
Registrant's 1995 Proxy Statement.
(g) Compliance with Section 16(a) of the Exchange Act
The Registrant hereby incorporates by reference in this Form 10-K
certain information contained under the caption "Election of Directors" in
Registrant's 1995 Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
The Registrant hereby incorporates by reference in this Form 10-K
certain information contained under the caption "Executive Compensation"
in Registrant's 1995 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
The Registrant hereby incorporates by reference in this Form 10-K
certain information contained under the caption "Principal Stockholders"
in Registrant's 1995 Proxy Statement.
(b) Security Ownership of Management.
The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Election of Directors" in Registrant's
1995 Proxy Statement.
(c) Changes in Control
The Registrant knows of no contractual arrangements, including any
pledge by any person of securities of the Registrant, the operation of
which may at a subsequent date result in a change in control of the
Registrant.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant hereby incorporates by reference in this Form 10-K
certain information contained under the captions "Security Ownership of
Certain Beneficial Owners and Management," "Election of Directors" and
"Executive Compensation" in Registrant's 1995 Proxy Statement.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements filed as part of this report:
Report of Independent Accountants
Consolidated Statements of Operations for the years ended June 30, 1995,
1994 and 1993
Consolidated Balance Sheets as of June 30, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended June 30, 1995,
1994 and 1993
Consolidated Statements of Stockholders' Equity (deficiency) for the years
ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Selected Financial Data
(2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts
All other financial statements and schedules not listed have been
omitted since the required information is included in the Consolidated
Financial Statements or the Notes thereto, or is not applicable, material
or required.
(3) Exhibits
Exhibit No. Description
4.1 Restated Certificate of Incorporation of the Company. (a)
4.2 Form of Warrant and Registration Rights Agreement to be dated
as of the closing of the Offering attached as an Annex to the "lock-up"
agreements with the holders of Convertible Preferred Stock that have
entered into lock-up agreements.(a)
4.3 Rights Agreement dated as of July 31, 1992 between the Company
and The First National Bank of Boston, as rights agent.(b)
10.1(a) 1991 Restated Stock Option Plan.(c)
10.1(b) Amendment No. 1 to 1991 Restated Stock Option Plan.(c)
10.2(a) Employee Stock Purchase Plan.(c)
10.2(b) Amendment No. 1 to Employee Stock Purchase Plan.(d)
10.3 Retirement Savings Plan (f/k/a Profit Sharing and Savings
Plan) of former Concurrent dated August 1, 1985, as restated.(e)
10.4 Form of Severance Agreement between the Company and its
executive officers. All agreements contain substantially the same terms
other than annual base salary and annual target bonus percentage.(f)
10.5 Form of Incentive Stock Option Agreement between the Company and
its executive officers. All agreements contain the same terms
with the exception of the number or shares subject to the option and the
vesting schedules.(g)
10.6(a) Amended and Restated Credit Agreement dated October 11,
1991 among the Company and the banks named therein, as amended by
Amendment No. 1 dated November 14, 1991.(h)
10.6(b) Amendment No. 2 dated as of January 13, 1992 to Amended and
Restated Credit Agreement. (g)
10.6(c) Amendment No. 3 dated as of March 1, 1993 to Amended and
Restated Credit Agreement. (f)
10.7(a) Second Amended and Restated Credit Agreement.(i)
10.7(b) Amendment No. 1 dated September 28, 1993 to Second Amended
and Restated Credit Agreement. (i)
10.7(c) Amendment No. 2 dated November 10, 1993 to Second Amended
and Restated Credit Agreement. (j)
10.7(d) Amendment No. 3 dated November 18, 1993 to Second Amended
and Restated Credit Agreement. (j)
10.7(e) Amendment No. 4 dated February 18, 1994 to Second Amended
and Restated Credit Agreement. (j)
10.7(f) Amendment No. 5 dated August 19, 1994 to Second Amended and
Restated Credit Agreement. (j)
10.7(g) Amendment No. 6 dated February 28, 1995 to Second Amended
and Restated Credit Agreement.
10.7(h) Amendment No. 7 dated March 31, 1995 to Second Amended and
Restated Credit Agreement.
10.7(i) Third Amended and Restated Credit Agreement dated June 29,
1995
10.8 (a) Slough, England real property lease.(k)
10.8 (b) Form of renewal agreement of Slough, England real property
lease.(i)
10.9 Lease dated June 30, 1992 between WRC Properties, Inc. (Lessor) and
the Company (Lessee) in connection with Westford, Massachusetts office space.
(i)
10.10 AT&T Information Systems Sublicensing Agreement.(a)
10.11 Loan and Security Agreement dated June 29, 1995 between the
Company and the lender named therein.
11.0 Statement re computation of per share earnings.
22.0 Subsidiaries of Registrant.
24.1 Consent of Coopers & Lybrand L.L.P.
__________
(a) Incorporated herein by reference to the Exhibits to the Company's
Amendment No. 3 to Registration Statement on Form S-2 dated July 14, 1993
(No. 33-62440).
(b) Incorporated herein by reference to the Company's Current Report on
Form 8-K dated August 20, 1992 (File No.0-13150).
(c) Incorporated herein by reference to Notice of 1991 Annual Meeting of
Stockholders and Proxy Statement, dated January 10, 1992. (File No. 0-
13150.)
(d) Incorporated by reference to Notice of 1992 Annual Meeting of
Stockholders and Proxy Statement, dated October 2, 1992. (File No. 0-13150.)
(e) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended July 2,
1988.
(f) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991. (File No. 0-13150.)
(g) Incorporated herein by reference to the Exhibits to the Company's
Amendment No. 1 to Registration Statement on Form S-1 dated April 20,
1992. (No. 33-45871).
(h) Incorporated hereby by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1991.
(i) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1993. (File No. 0-13150).
(j) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1994. (File No. 0-13150).
(k) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1989. (File No. 0-13150.)
(l) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1992. (File No. 0-13150).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONCURRENT COMPUTER CORPORATION
Date: September 27, 1995 By: /s/ Kevin J. Dell
Kevin J. Dell
Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of
Registrant and in the capacities and on the date indicated.
Name Capacity
/s/ John T. Stihl Chairman of the Board,
John T. Stihl President and Chief
Executive Officer
/s/ Roger J. Mason Vice President, Finance
Roger J. Mason and Treasurer
Chief Financial
Officer
/s/ Michael A. Brunner Director
Michael A. Brunner
/s/ Kevin N. Clowe Director
Kevin N. Clowe
/s/ C. Forbes Dewey, Jr. Director
C. Forbes Dewey, Jr.
/s/ Morton E. Handel Director
Morton E. Handel
/s/ Richard P. Rifenburgh Director
Richard P. Rifenburgh
/s/ Robert R. Sparacino Director
Robert R. Sparacino
Date: September 27, 1995
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors
of Concurrent Computer Corporation
We have audited the accompanying consolidated balance sheets of
Concurrent Computer Corporation as of June 30, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity
(deficiency) and cash flows for each of the three years in the period
ended June 30, 1995, and the financial statement schedules listed in Item
14(a) of the Company's 1995 Annual Report on Form 10-K. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Concurrent Computer Corporation as of June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended June 30, 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion,
the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information required to be included
therein.
As discussed in Notes 11 and 14 to the consolidated financial
statements, in 1994 the Company changed its method of accounting for
income taxes and changed its method of accounting for postretirement
benefits other than pensions.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
August 15, 1995,
except for Note 19, as to which
the date is September 26, 1995
CONCURRENT COMPUTER CORPORATION
FINANCIAL STATEMENTS
Concurrent Computer Corporation
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Year Ended June 30,
1995 1994* 1993*
Net sales:
Computer systems $72,074 $100,293 $132,883
Service and other 68,070 78,738 87,581
Total 140,144 179,031 220,464
Cost of sales:
Computer systems 38,639 54,517 59,961
Service and other 40,838 48,473 55,662
Total 79,477 102,990 115,623
Gross margin 60,667 76,041 104,841
Operating expenses:
Research and development 19,464 23,823 26,824
Selling, general and administrative 36,921 48,651 59,279
Provision for restructuring 3,200 12,000 -
Sales and use tax credit (1,000) (1,440) -
Total operating expenses 58,585 83,034 86,103
Operating income (loss) 2,082 (6,993) 18,738
Interest expense (2,638) (3,486) 13,553)
Interest income 513 634 1,167
Other non-recurring charge (1,000) - -
Other income (expense) - net 737 (486) (183)
Income (loss) before provision for income taxes,
extraordinary loss and cumulative effect of change
in accounting principles (306) (10,331) 6,169
Provision for income taxes 1,700 1,300 2,300
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principles (2,006) (11,631) 3,869
Extraordinary loss on early extinguishment
of debt - (23,193) -
Cumulative effect of change in accounting
principles for income taxes and
postretirement benefits - (5,000) -
Net income (loss) ($2,006) ($39,824) $3,869
Income (loss) per share:
Income (loss) before extraordinary loss
and cumulative effect of change in
accounting principles ($0.07) ($0.41) $0.40
Extraordinary loss on early
extinguishment of debt - (0.83) -
Cumulative effect of change in
accounting principles for income taxes
and postretirement benefits - (0.18) -
Net income (loss) ($0.07) ($1.42) $0.40
* Reclassified to conform to current year presentation.
The accompanying notes are an integral part of the consolidated financial
statements.
Concurrent Computer Corporation
Consolidated Balance Sheets
(Dollars in thousands)
June 30, June 30,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $5,728 $9,374
Accounts receivable, less allowance
for doubtful accounts of
$1,434-1995; $3,405-1994 25,456 34,519
Inventories 14,510 17,829
Prepaid expenses and other
current assets 4,303 5,334
Total current assets 49,997 67,056
Property, plant and equipment - net 38,567 42,742
Other long-term assets 9,795 13,372
Total assets $98,359 $123,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $6,716 $5,749
Current portion of long-term debt 1,529 11,000
Revolving credit facility 5,761 -
Accounts payable and accrued expenses 29,285 44,687
Deferred revenue 4,841 6,236
Total current liabilities 48,132 67,672
Long-term debt 9,536 13,240
Other long-term liabilities 5,521 7,210
Commitments and contingencies - -
Stockholders' equity
Shares of preferred stock,
par value $0.01; authorized
25,000,000 - -
Shares of common stock,
par value $0.01; authorized
100,000,000; issued
30,208,276-1995 and 29,585,388-1994 302 296
Capital in excess of par value 73,112 71,547
Accumulated deficit after
eliminating accumulated deficit of
$81,826 at December 31, 1991, date
of quasi-reorganization (37,028) (35,022)
Shares of treasury stock, at cost;
840 shares (58) (58)
Cumulative translation adjustment (1,158) (1,715)
Total stockholders' equity 35,170 35,048
Total liabilities and stockholders'
equity $98,359 $123,170
The accompanying notes are an integral part of the consolidated financial
statements.
Concurrent Computer Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years Ended June 30,
1995 1994* 1993*
Cash flows provided by (used by) operating
activities:
Net income/(loss) ($2,006) ($39,824) $3,869
Adjustments to reconcile net income/(loss)
to net cash provided by (used by)
operating activities:
Depreciation, amortization and other 12,284 12,527 13,503
Provision for inventory reserves 5,037 4,461 1,840
Non-cash taxes related to the utilization
of net operating loss carryforwards
which originated prior to the Company's
quasi-reorganization, effected on
December 31, 1991 300 - 572
Non-cash interest and amortization of
financing costs 450 1,061 9,265
Extraordinary loss on early extinguishment
of debt - 23,193 -
Cumulative effect of change in accounting
principles - 5,000 -
Provision for restructuring 3,200 12,000 -
Other non-recurring charge 1,000 - -
Sales and use tax credit (1,000) (1,440) -
Decrease (increase) in current assets:
Accounts receivable 10,431 3,690 4,782
Inventories (2,044) (319) (3,881)
Prepaid expenses and other current
assets 998 1,238 1,698
Decrease in current liabilities, other
than debt obligations (18,017) (14,797) (2,361)
Decrease (increase) in other long-term
assets 599 (1,790) 391
(Decrease) increase in other long-term
liabilities (1,983) 193 (264)
Total adjustments to net income/(loss) 11,255 45,017 25,545
Net cash provided by operating activities 9,249 5,193 29,414
Cash flows used by investing activities:
Additions to property, plant and equipment (5,140) (7,584) (10,569)
Cash flows provided by (used by) financing
activities:
Net proceeds (payments) of notes payable (100) 2,511 588
Repayment of long-term debt (23,395) (76,602) (8,460)
Issuance of long-term debt 15,761 708 -
Net proceeds from sale and issuance of
common stock 150 55,001 291
Net cash used by financing activities (7,584) (18,382) (7,581)
Effect of exchange rate changes on cash
and cash equivalents (171) (275) (1,453)
Increase (decrease) in cash and cash
equivalents ($3,646) ($21,048) $9,811
Cash and cash equivalents - Beginning of year $9,374 $30,422 $20,611
Cash and cash equivalents - End of year $5,728 $9,374 $30,422
Cash paid during the period for:
Interest $2,256 $2,731 $4,282
Income taxes (net of refunds) $727 $659 $1,510
* Reclassified to conform to current year presentation.
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
Concurrent Computer Corporation
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock Common Stock Capital in Accumulated Cumulative
Par Par Excess of Earnings Translation Treasury Stock
Shares Value Shares Value Par Value (Deficit) Adjustment Shares Cost Total
Balance
June 30, 1992 6,983,284 $70 2,171,883 $22 $14,237 $933 ($465) (840) ($58) $14,739
Sale of common stock
under stock plans 67,021 1 284 285
Issuance of common
stock under retirement
savings plan 336,404 3 527 530
Conversion of preferred
stock (1,578) 1,578 -
Other 2,140 6 6
Net income 3,869 3,869
Foreign currency trans-
lation adjustment (1,498) (1,498)
Quasi-reorganization
related adjustments:
Utilization of net
operating loss
carryforwards 572 572
Balance June 30,
1993 6,981,706 70 2,579,026 26 15,626 4,802 (1,963) (840) (58) 18,503
Issuance of common
stock under retirement
savings plan 324,377 3 1,057 1,060
Issuance of common
stock 19,700,000 197 54,803 55,000
Conversion of preferred
stock (6,981,706) (70) 6,981,706 70 -
Other 279 61 61
Net loss (39,824) (39,824)
Foreign currency trans-
lation adjustment 248 248
Balance June 30,
1994 - - 29,585,388 296 71,547 (35,022) (1,715) (840) (58) 35,048
Sale of common stock
under stock plans 85,358 1 149 150
Issuance of common
stock under retirement
savings plan 368,823 3 762 765
Issuance of common
stock under bonus plan 168,707 2 324 326
Other 30 30
Net loss (2,006) (2,006)
Foreign currency trans-
lation adjustment 557 557
Quasi-reorganization
related adjustments:
Utilization of net
operating loss
carryforwards 300 300
Balance June 30,
1995, - - 30,208,276 $302 $73,112 ($37,028) ($1,158) (840) ($58) $35,170
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
CONCURRENT COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
During fiscal year 1995, the Company continued to experience a decline
in net sales. Despite the decline, operating income improved by
approximately $9.1 million and net cash from operations improved by
approximately $4.1 million as a result of the Company's productivity
improvements, restructuring and ongoing cost reduction initiatives.
The Company continues to manage its resources and to focus its revenue
generating activities with the objectives to achieve growth and
improve profitability. In addition, the Company recently completed a
refinancing of its bank term loan providing the Company with reduced
debt service payments and less stringent financial covenant compliance
requirements (see Note 3). The Company continues to pursue various
additional financing alternatives, including a sale/leaseback of its
Oceanport, New Jersey facility (see Note 19), to further improve its
financial flexibility. The Company believes that it will be able to
meet its obligations when due through its operating and financing
efforts.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of all
majority-owned domestic and foreign subsidiary companies. All
intercompany transactions and balances have been eliminated.
Foreign Currency
The functional currency of substantially all of the Company's foreign
subsidiaries is the applicable local currency. The translation of the
applicable foreign currencies into U.S. dollars is performed for
balance sheet accounts using current exchange rates in effect at the
balance sheet date and for revenue and expense accounts using average
rates of exchange prevailing during the fiscal year. Adjustments
resulting from the translation of foreign currency financial
statements are accumulated in a separate component of stockholders'
equity until the entity is sold or substantially liquidated. Gains or
losses resulting from foreign currency transactions are included in
the results of operations, except for those relating to intercompany
transactions of a long-term investment nature which are accumulated in
a separate component of stockholders' equity.
Gains (losses) on foreign currency transactions of $175,000,
($360,000) and $606,000 for the fiscal years ended June 30, 1995, 1994
and 1993, respectively, are included in Other income (expense) - net.
2. Summary of Significant Accounting Policies, Continued
Cash and Cash Equivalents
For financial statement purposes, short-term investments with original
maturities of ninety days or less from the date of purchase are
considered cash equivalents.
Cash equivalents are stated at cost plus accrued interest, which
approximates market, and represents cash invested in U.S. Government
securities, bank certificates of deposit, or commercial paper. Such
short-term investments amounted to $480,000 and $2,591,000 at June 30,
1995 and 1994, respectively.
At June 30, 1995, the Company had $684,000 of restricted cash
primarily supporting building rental deposits.
Inventories
Inventories are stated at the lower of cost or market, with cost determined on
the first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at acquired cost less
accumulated depreciation. Depreciation is provided on a straight-line
basis over the estimated useful lives of assets ranging from three to
forty years.
Leasehold improvements are amortized over the shorter of the useful
lives of the improvements or the terms of the related lease. Gains
and losses resulting from the disposition of property, plant and
equipment are included in Other income (expense) - net.
Expenditures for repairs and maintenance are charged to operations as
incurred and expenditures for major renewals and betterments are
capitalized.
Revenue Recognition
Computer systems sales (hardware and software, including bundled
software) are recorded when the earnings process is complete,
typically upon shipment to customers.
Service contract revenue related to hardware and software is recognized
separately and as earned over the respective maintenance period in
accordance with the terms of the applicable contract.
Income Taxes
The Company and its domestic subsidiaries file a consolidated Federal
income tax return. Certain items of revenue and expense are reported
for Federal income tax purposes in different periods than for
financial reporting purposes and are accounted for under the asset and
liability method as required by the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("FAS No. 109").
2. Summary of Significant Accounting Policies, Continued
Income Taxes, Continued
On July 1, 1993, the Company adopted the provisions of FAS No. 109.
This standard requires a change from the deferred method to the asset
and liability method of accounting for income taxes. Under the asset
and liability method, a deferred tax asset or liability is recognized
for temporary differences between financial reporting and income tax
bases of assets and liabilities, tax credit carryforwards and
operating loss carryforwards. A valuation allowance is established to
reduce deferred tax assets if it is more likely than not that such
deferred tax assets will not be realized. Utilization of net
operating loss carryforwards and tax credits, which originated prior
to the Company's quasi-reorganization effected on December 31, 1991,
are recorded as adjustments to capital in excess of par value. Prior
years' financial statements have not been restated.
The cumulative effect of adopting this standard resulted in the
Company recording a $2.0 million non-cash charge reducing its deferred
tax assets as of the date of adoption.
Capitalized Software
The Company, in accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed", commences capitalization of
software production costs upon the achievement of technological
feasibility and ceases capitalization upon the achievement of customer
availability. Such costs are amortized over the greater of the ratio
of the product's current to total revenue stream or the straight-line
method over its estimated useful life. Such amortization period
generally does not exceed three years. For the years ended June 30,
1995, 1994 and 1993, amortization expense relating to software
production costs which is included as a component of cost of sales
amounted to $1,160,000, $445,000 and $436,000, respectively.
Accumulated amortization amounted to $1,325,000 and $165,000,
respectively, at June 30, 1995 and 1994. Capitalized software (net)
amounted to $965,000 and $1,985,000 at June 30, 1995 and 1994,
respectively.
Research and Development
Research and development expenditures, other than capitalized
software, are expensed when incurred.
Income (Loss) per Share
Primary earnings per share (including convertible participating
preferred stock, dilutive stock options and common stock purchase
warrants) is computed on the basis of the weighted average number of
common shares outstanding during each year and includes shares assumed
issued upon the exercise of all dilutive stock options and common
stock purchase warrants and the purchase of treasury stock with the
proceeds at the average market price for the period.
2. Summary of Significant Accounting Policies, Continued
Income (Loss) per Share, Continued
Fully diluted earnings per share assumes the exercise of all dilutive
stock options and common stock purchase warrants and the purchase of
treasury stock at the higher of the market price at the end of the
year or the average market price during the year. For fiscal year
1993, the computation of fully diluted earnings per share did not have
a dilutive effect on earnings per share.
The number of shares used in computing income (loss) per share was
30,095,000, 28,054,000 and 9,765,000 for the years ended June 30,
1995, 1994 and 1993, respectively.
Supplemental income per share for the year ended June 30, 1993 was
calculated assuming the Company's comprehensive refinancing (as
described in Note 4) took place on July 1, 1992. The Company's
supplemental net income per share for the year ended June 30, 1993 was
$0.32.
Postretirement Benefits Other Than Pensions
On July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("FAS No. 106"). This
standard requires companies to accrue postretirement benefits
throughout the employees' active service periods until they attain
full eligibility for those benefits. The transition obligation (the
accumulated postretirement benefit obligation at the date of adoption)
may be recognized either immediately or by amortization over the
longer of the average remaining service period for active employees or
20 years.
In connection with the adoption of this standard, the Company recorded
a non-cash charge of $3.0 million representing the immediate
recognition of the accumulated postretirement benefit obligation at
the date of adoption.
3. Debt and Lines of Credit
On June 29, 1995, the Company completed a refinancing of its then
outstanding $15.4 million existing bank term loan (the "Existing
Term Loan"), excluding up to $3.0 million in standby letters of
credit in connection with overseas lines of credit which remain in
place. In connection with this refinancing, the Company has entered
into a new agreement providing for a $18.0 million credit facility.
The facility includes a $10.0 million term loan (the "Term Loan")
and a $8.0 million revolving credit facility (the "Revolver").
3. Debt and Lines of Credit, Continued
At June 30, 1995, the outstanding balances under the Term Loan and
the Revolver were $10.0 and $5.8 million, respectively. The
outstanding balance of the Revolver has been classified as a current
liability at June 30, 1995. Both the Term Loan and the Revolver
bear interest at the prime rate plus 2.0%. The Term Loan is payable
in 36 equal monthly installments of $139,000 each, commencing August
1, 1995, with a final payment of approximately $5.0 million payable
August 1, 1998. The Revolver may be repaid and reborrowed, subject
to certain collateral requirements, at any time during the term
ending August 1, 1998. The Company has pledged substantially all of
its domestic assets as collateral for the Term Loan and the
Revolver. The Company may repay the Term Loan at any time without
penalty. In the event of a sale or sale/leaseback of its Oceanport
and Tinton Falls facilities, the Company is required to make a
prepayment of the Term Loan up to an amount equal to 75% of the net
sale proceeds. Certain early termination fees apply if the Company
terminates the facility in its entirety prior to August 1, 1998.
The new agreement contains various covenants and restrictions, which
among other things (1) place certain limits on corporate acts of the
Company such as fundamental changes in the corporate structure of
the Company, investments in other entities, incurrence of additional
indebtedness, creation of liens or certain distributions or
dispositions of assets, including cash dividends, and (2) require
the Company to meet financial tests on a periodic basis, the most
restrictive of which relate to the maintenance of collateral
coverage and debt coverage all as defined in the agreement. In
addition, the new agreement contains a subjective provision
entitling the lender to accelerate payments under the Term Loan and
Revolver.
At June 30, 1994, the outstanding balance under the Existing Term
Loan, which resulted from modifications of a previous term loan in
connection the 1993 Refinancing (defined in Note 4), was $23.0
million and bore interest, at the Company's option, at an annual
rate equal to either the prime rate plus 1.0%, or the London
Interbank Offered Rate (LIBOR) plus 3.0%. The Existing Term Loan
was payable in 24 equal monthly installments of $687,500 each,
commencing July 30, 1993, with a final payment of $12.0 million
(reduced from $15 million) payable October 1, 1995. The Company had
pledged substantially all of its domestic assets as collateral for
the Existing Term Loan. The Company was able to prepay the Existing
Term Loan at any time without penalty.
Since the 1993 Refinancing, the Existing Term Loan was amended from
time to time to provide the Company with greater financial flexibility.
The various amendments provided for amendments to and
waivers of certain financial covenants, deferrals of certain
scheduled debt payments, extension of the maturity date from June
30, 1995 to October 1, 1995, up to $3.0 million in standby letters
of credit in connection with overseas lines of credit and the
issuance of 600,000 stock purchase warrants to the banks with an
exercise price per share of $1.50 which was equal to the then fair
market value. The warrants expired unexercised on September 30,
1994.
3. Debt and Lines of Credit, Continued
Although the Company's original term loan agreement was terminated
as part of the recapitalization of the Company in November 1991, the
terms of an interest rate swap agreement remained in effect until it
was bought-out in connection with the 1993 Refinancing. The fixed
rate under the swap agreement resulted in additional interest
expense of $822,000 for the year ended June 30, 1993.
The net proceeds of the 1993 Refinancing ($55.0 million) together
with $11.9 million of Company cash were used to redeem in full the
Subordinated Debt. The Subordinated Debt of $55 million in
principal amount issued on November 22, 1991 bore interest at an
annual rate of 12.08%, payable semi-annually on March 15 and
September 15 and payable in additional Subordinated Debentures in
lieu of cash for up to the first three years, but not less than the
first two years.
The principal amount of the Subordinated Debt, including notes
issued in lieu of payment of cash interest, was payable in a lump
sum at maturity on December 31, 1997. Subordinated Debt issued and
accrued in lieu of cash interest amounted to approximately $0.6
million and $7.4 million for the years ended June 30, 1994 and 1993,
respectively.
The Company's foreign subsidiaries have certain bank borrowing
arrangements in local currencies which provide for borrowings of up
to $8,861,000 at prevailing rates of interest ranging from 2.375% to
9.4% at June 30, 1995. At June 30, 1995, $6,716,000 of demand notes
were outstanding under such arrangements of which $3,375,000 is
guaranteed by the minority shareholder in the Company's Japanese
subsidiary and $2,749,000 is guaranteed by the Company. Foreign
unused lines of credit can be withdrawn at any time at the option of
either the Company or the lending institutions.
Annual maturities of all the Company's debt for the fiscal years
ended June 30, 1996 through 2000, and thereafter, are as follows:
(Dollars in thousands)
Annual
Maturities
1996 $14,006
1997 2,048
1998 2,108
1999 5,380
2000 -
Thereafter -
Total $23,542
4. Refinancing
On July 21, 1993, the Company completed a comprehensive refinancing
(the "1993 Refinancing"). The 1993 Refinancing consisted of the
following: a) the sale and issuance of 19,700,000 shares of common
stock, with a par value of $0.01, at a price of $3.00 per share for
$59.1 million less issuance costs of approximately $4.1 million (the
"Offering"); b) the modification of the Company's then existing bank
term loan to, among other things, extend the maturity date and reduce
the interest rate; and c) the conversion of all of the 6,981,706
outstanding shares of the Company's convertible participating
preferred stock (the "Convertible Preferred Stock") into shares of
common stock at a ratio of one to one.
The net proceeds of the Offering ($55.0 million) together with $11.9
million of Company cash were used to redeem in full the Company's
outstanding 12.08% Senior Subordinated Notes due 1997 (the
"Subordinated Debt") at face amount, plus accrued interest, as of July
21, 1993. The Subordinated Debt was originally recorded with an
original issue discount resulting in an effective yield-to-maturity of
25%. The redemption of the Subordinated Debt resulted in an
extraordinary charge reducing net income by $23.2 million during the
first quarter of fiscal year 1994 based on an aggregate cash
redemption price of $66.9 million and a book value of $43.7 million.
The 1993 Refinancing, including the effect of the redemption of the
Subordinated Debt and related $23.2 million extraordinary charge,
resulted in a $31.8 million increase to stockholders' equity as of the
date the transactions were completed.
The extraordinary loss on the early extinguishment of debt is
determined as follows:
(Dollars in thousands)
Face amount of Subordinated Debt $64,206
Accrued interest on Subordinated Debt 2,715
Sub-total 66,921
Book value of Subordinated Debt (43,728)
Extraordinary loss $23,193
The extraordinary loss on the early extinguishment of debt did not
result in the recognition of a tax benefit due to a difference in the
financial reporting and tax bases of the underlying subordinated
debt.
5. Provision for Restructuring
In January 1995 and April 1995, the Company's senior management
approved plans to restructure its operations. The restructuring
plans provided for a reduction of approximately 175 worldwide
employees and the downsizing or closing of office locations. In
connection with the restructurings, the Company recorded a $2.7
million and a $0.5 million provision for restructuring during the
quarters ended March 31, 1995 and June 30, 1995, respectively. The
provision during the quarter ended March 31, 1995 is net of a $0.5
million release of an excess restructuring reserve previously
recorded during the three months ended September 30, 1993. The
provision includes employee terminations in positions ranging from
the staff level to the middle management level, office closings or
downsizings and other related costs which represented approximately
60%, 30% and 10% of the provision, respectively. During the year
ended June 30, 1995, the actual cash payments related to the 1995
restructurings amounted to approximately $2.4 million and were
primarily related to employee termination costs.
During the three months ended September 30, 1993, the Company
recorded a provision for restructuring of $12.0 million in connection
with its operational restructuring to reduce its worldwide cost
structure. The provision included employee terminations, office
closings or downsizings and other related costs which represented
approximately 65%, 25% and 10% of the provision, respectively.
6. Change in Accounting Estimate
During the three months ended December 31, 1994 and 1993, the Company
recorded a sales and use tax credit of $1.0 million, or $0.03 per
share, and $1.4 million, or $0.05 per share, respectively, related to
a change in the estimate of state sales and use tax reserves based on
a final state audit determination.
7. Concentration of Credit Risk
Concentration of credit risk with respect to trade receivables is
limited due to the large number of customers comprising the Company's
customer base. Ongoing credit evaluations of customers' financial
condition are performed and collateral is generally not required.
8. Inventories
Inventories consist of:
(Dollars in thousands)
1995 1994
Raw Materials $ 7,111 $ 9,270
Work-in-process 753 2,872
Finished goods 6,646 5,687
$14,510 $17,829
9. Property, Plant and Equipment and Other Long-Term Assets
Property, plant and equipment consists of:
(Dollars in thousands)
1995 1994
Land $ 5,346 $ 5,275
Buildings 17,158 16,530
Machinery and equipment 53,636 47,581
76,140 69,386
Less: Accumulated depreciation (37,573) (26,644)
$38,567 $42,742
For the years ended June 30, 1995, 1994 and 1993, depreciation and
amortization expense for property plant and equipment amounted to
$10,641,000, $11,685,000 and $12,668,000 respectively.
10. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of:
(Dollars in thousands)
1995 1994
Accounts payable - trade $11,023 $13,327
Accrued payroll, vacation and other
employee expenses 8,510 12,775
Restructuring costs 2,568 6,274
Other accrued expenses 7,184 12,311
$29,285 $44,687
11. Income Taxes
On July 1, 1993, the Company adopted the provisions of FAS No. 109.
The cumulative effect of adopting this standard resulted in the
Company recording a $2.0 million non-cash charge reducing its
deferred tax assets as of the date of adoption. Prior years'
financial statements have not been restated.
The domestic and foreign components of income (loss) before
provision for income taxes, extraordinary gain (loss) on early
extinguishment of debt, and the cumulative effect of change in
accounting principles are as follows:
(Dollars in thousands)
1995 1994 1993
United States $ (4,705) $ (5,758) $ 5,797
Foreign 4,399 (4,573) 372
$ (306) $(10,331) $ 6,169
The components of the provision for income taxes are as follows:
(Dollars in thousands)
1995 1994 1993
Current:
Federal $ - $ - $ 300
Foreign 1,700 1,300 1,692
State - - 72
Total $ 1,700 $ 1,300 $2,064
Deferred:
Federal $ - $ - $ -
Foreign - - 236
State - - -
Total $ - $ - $ 236
Total $1,700 $ 1,300 $2,300
11. Income Taxes, Continued
For the fiscal years ended June 30, 1995 and 1993, the current
provision for income taxes includes an equivalent charge of $300,000
and $572,000, respectively, which was fully offset in capital in
excess of par value due to the utilization of tax loss carryforwards
which originated prior to the Company's quasi-reorganization,
effected on December 31, 1991.
A reconciliation of the Federal statutory tax provision to the
Company's provision for income taxes is as follows:
(Dollars in thousands)
1995 1994 1993
Income (loss) before provision for
income taxes, extraordinary gain
(loss) and cumulative effect of
change in accounting principles $ (306) $(10,331) $ 6,169
Tax at Federal statutory rate (104) (3,513) 2,097
U.S. Federal and non U.S. net
operating losses for which no
tax benefit was recorded 2,890 4,466 1,472
Difference between U.S. and non
U.S. income tax rates (1,146) 10 329
Tax benefit related to permanent
differences - - (1,496)
State income tax - - 54
Other 60 337 (156)
Provision for income taxes 1,700 $ 1,300 $ 2,300
As of June 30, 1995 and 1994, the Company's deferred tax assets were
comprised of the following:
(Dollars in thousands)
June 30, June 30,
1995 1994
Gross deferred tax assets related to:
Net operating loss carryforwards $37,740 $34,170
Accumulated depreciation 3,737 5,042
Restructuring reserves 3,253 4,276
Inventory reserves 3,300 3,557
Accrued compensation 931 1,544
Post-retirement benefits 928 1,010
Other 2,426 3,009
Total Gross deferred tax assets 52,315 52,608
Valuation Allowance (52,315) (52,608)
Net deferred tax assets $ 0 $ 0
11. Income Taxes, Continued
During fiscal year 1994, the deferred tax liability related to the
Company's Subordinated Debt was reversed upon the early extinguishment
of such debt. In connection with this reversal, the Company recorded
a corresponding increase to its deferred tax asset valuation
allowance.
As of June 30, 1995, the Company has remaining net operating loss
carryforwards of approximately $104 million for income tax purposes.
Approximately $61 million of these net operating loss carryforwards
originated prior to the Company's quasi-reorganization, effected on
December 31, 1991. In addition, approximately $9 million of these net
operating loss carryforwards originated subsequent to the Company's
quasi-reorganization through the date of the 1993 Refinancing.
Any future benefits attributable to the net operating loss
carryforwards which originated prior to the Company's quasi-
reorganization are accounted for through adjustments to capital in
excess of par value. Under the changes in ownership provisions of
Section 382 of the Internal Revenue Code,
future benefits attributable to the net operating loss carryforwards
and tax credits which originated prior to the quasi-reorganization
are limited to approximately $1.3 million per year and those which
originated subsequent to the Company's quasi-reorganization through
the date of the 1993 Refinancing are limited to approximately $0.3
million per year. The Company's net operating loss carryforwards
begin to expire in 2004. As of June 30, 1995, after giving effect to
the aforementioned Internal Revenue Code limitation, the Company has
remaining utilizable net operating loss carryforwards of approximately
$66 million for income tax purposes.
Deferred income taxes have not been provided on approximately $10
million of undistributed earnings of foreign subsidiaries, which
originated subsequent to the Company's quasi-reorganization, primarily
due to either the Company's required investment in certain
subsidiaries or foreign tax rates which exceed the U.S. tax rate.
Additionally, deferred income taxes have not been provided on
approximately $3 million of undistributed earnings of foreign
subsidiaries which originated prior to the Company's quasi-
reorganization. The impact of both the subsequent repatriation of
such earnings and the resulting offset, in full, from the utilization
of net operating loss carryforwards will be accounted for through
adjustments to capital in excess of par value. The Company has
sufficient net operating loss carryforwards remaining to offset such
subsequent repatriation.
12. Geographic Information
Below is a summary of the Company's 1995, 1994 and 1993 financial data
by geographic area.
Dollars in thousands)
1995 1994 1993
Net Sales:
United States $ 75,362 $106,256 $141,355
Intercompany 15,265 17,241 20,938
90,627 123,497 162,293
Europe 39,431 43,807 47,031
Intercompany 127 38 19
39,558 43,845 47,050
Asia/Pacific 14,100 14,380 16,051
Japan 7,818 11,759 12,299
Other 3,433 2,829 3,728
25,351 28,968 32,078
155,536 196,310 241,421
Eliminations (15,392) (17,279) (20,957)
Total $140,144 $179,031 $220,464
Operating income (loss):
United States $ (2,398) $ (3,836) $ 18,440
Europe 4,602 (2,432) (493)
Asia/Pacific 3,809 2,010 2,237
Japan (1,792) (103) 493
Other 863 853 1,050
General corporate expenses (2,741) (2,976) (3,179)
Eliminations (261) (509) 190
Total $ 2,082 $ (6,993) $ 18,738
1995 1994
Identifiable assets:
United States $106,510 $128,147
Europe 24,493 26,748
Asia/Pacific 7,441 6,115
Japan 11,559 12,113
Other 1,807 1,815
Corporate 5,489 8,285
Eliminations (58,940) (60,053)
Total $ 98,359 $123,170
12. Geographic Information, Continued
Intercompany transfers between geographic areas are accounted for at
prices similar to those available to comparable unaffiliated
customers. Sales to unaffiliated customers outside the U.S.,
including U.S. export sales, were $66,913,000, $73,893,000 and
$83,134,000 for the years ended June 30, 1995, 1994 and 1993,
respectively, which amounts represented 48%, 41%, and 38% of total
sales for the respective years.
Sales to the U.S. Government and its agencies amounted to
$39,207,000, $54,757,000 and $64,340,000, respectively, for the years
ended June 30, 1995, 1994 and 1993, which amounts represented 28%,
31% and 29% of total sales for the respective years. The Company's
revenues are derived from various customer sources including Unisys
Corp., the prime contractor under the U.S. Department of Commerce's
Next Generation Radar (NEXRAD) program and the U.S. Department of
Commerce under the NEXRAD program. Sales to Unisys Corp. amounted to
$7,473,000, $22,245,000 and $35,723,000, respectively, for the years
ended June 30, 1995, 1994 and 1993, which amounts represented 5%, 12%
and 16%, respectively, of total revenues. Sales directly to U.S.
Department of Commerce amounted to $10,022,000 for the year ended
June 30, 1995 which amount represented 7% of total revenues.
13. Retirement Benefits
The Company has a retirement savings plan (the "Plan") available to
U.S. employees which qualifies as a defined contribution plan under
Section 401(k) of the Internal Revenue Code. Annual Company
contributions currently are determined based upon the achievement of
certain return on equity objectives with the minimum contribution
being 2% of employees' eligible earnings, as defined by the Plan.
The Company also matches a portion of employees' before-tax savings.
The Company's annual and matching contributions under this plan are
as follows:
(Dollars in thousands)
1995 1994 1993
Annual contribution in common stock $ 518 $ 767 $ 1,100
Matching contribution 251 333 359
Total $ 769 $ 1,100 $ 1,459
The Company's annual contribution under this Plan for the year ended
June 30, 1995 was funded in common stock of the Company during the
quarter ending September 30, 1995.
Certain foreign subsidiaries of the Company maintain pension plans
for their employees which conform to the common practice in their
respective countries. The pension expense related to these plans
amounted to $381,000, $213,000 and $286,000 for the years ended June
30, 1995, 1994 and 1993, respectively.
13. Retirement Benefits, Continued
The Company's net pension expense (income) for the years ended June
30, 1995, 1994 and 1993 consists of the following components:
(Dollars in thousands)
1995 1994 1993
Service cost $ 645 $ 522 $ 509
Interest cost 653 546 539
Return on plan assets (661) (707) (1,324)
Net amortization and deferral (256) (148) 562
$ 381 $ 213 $ 286
The funded status of the Company's international pension plans at
June 30, 1995 and 1994 was as follows:
(Dollars in thousands)
1995 1994
Actuarial present value of benefit obligations:
Vested benefit obligation $7,624 $6,048
Accumulated benefit obligation 7,783 6,207
Projected benefit obligation 9,288 7,486
Plan assets at fair value 9,531 8,718
Plan assets in excess of projected
benefit obligation 243 1,232
Unrecognized net asset at transition (418) (479)
Unrecognized net gain (806) (1,499)
Accrued pension liability $ (981) $ (746)
In determining the present value of benefit obligations and the
expected return on plan assets for the Company's foreign pension
plans, the following assumptions were used for the years ended June
30, 1995, 1994 and 1993:
(Dollars in Thousands)
1995 1994 1993
Discount rate 6.0% to 9.0% 6.0% to 9.0% 7.5% to 9.0%
Rate of increase in future
compensation levels 4.0% to 7.0% 4.0% to 6.0% 5.5% to 6.0%
Expected long-term
rate of return 7.0% to 9.0% 7.0% to 10.0% 7.5% to 10.0%
Plan assets are comprised primarily of investments in managed funds
consisting of common stock, money market and real estate investments.
14. Postretirement Benefits Other Than Pensions
On July 1, 1993, the Company adopted the provisions of FAS No. 106.
In connection with the adoption of this standard, the Company
recorded a non-cash charge of $3.0 million representing the immediate
recognition of the accumulated postretirement benefit obligation at
the date of adoption.
The Company has a plan for retiree medical and life insurance
benefits for its U.S. employees but does not have any significant
foreign plans. Based on the terms of the U.S. plan, participants
must be age 55 with at least 10 years of service to be eligible for
medical benefits. If the retiree is age 55 and has a minimum of five
years of service, but less than 10 years of service, coverage of
certain medical benefits can be purchased through the Company.
The comprehensive plan, which may be amended at the Company's
discretion, provides lifetime coverage for retirees and coverage for
spouses until one year after the death of the retiree. The plan
provides that the Company's costs will be capped at the 1993 level.
Eligibility for life insurance is restricted to employees who retired
prior to January 1993.
The unfunded status of the plan at June 30, 1995 and 1994 was as
follows:
Accumulated Postretirement Benefit Obligation:
(Dollars in thousands)
June 30, June 30,
1995 1994
Active Ineligible Plan Participants $ 790 $ 1,115
Active Eligible Plan Participants 521 516
Retirees and Dependents 1,275 1,356
Total accumulated postretirement
benefit obligation 2,586 2,987
Unrecognized net gain 144 -
Accrued postretirement benefit
obligation $ 2,730 $ 2,987
The Company's net periodic postretirement benefit expense (income)
for the years ended June 30, 1995 and 1994 consist of the following
components:
(Dollars in thousands)
1995 1994
Service cost $116 $188
Interest cost 209 238
Return on plan assets - -
Curtailment gain (422) (300)
($ 97) $126
14. Postretirement Benefits Other Than Pensions, Continued
For the year ended June 30, 1993, the Company recognized
postretirement benefit costs as incurred, thus the amounts recognized
as expense in prior years are not comparable.
During the years ended June 30, 1995 and 1994, the Company recorded a
curtailment gain of $422,000 and $300,000, respectively as a result
of the reduction in work force in connection with several
restructuring initiatives undertaken by the Company.
In determining the accumulated postretirement benefit obligation for
the years ended June 30, 1995 and 1994, the assumed weighted average
discount rate was 7.5% and the assumed rate of increase in
compensation was 5.0%.
Assumed health care cost increases, estimated to be 9% for the fiscal
year 1996, decline at a rate of approximately 0.5% to 1.0% per year
to the ultimate trend rate of 5.0% in the year 2001. Notwithstanding
the above, a 1% increase in the health care cost trend rate would not
have an effect on the accumulated postretirement benefit obligation
since the plan provides that the Company's future costs will be capped at
the 1993 level.
15. Employee Stock Plans
The Company has a Stock Option Plan providing for the grant of
incentive stock options to employees with an exercise price not less than fair
market value and non-qualified stock options
(NSOs) to employees, non-employee directors and consultants with an
exercise price not less than 50% of fair market value. The
Stock Option Plan is administered by the Stock Award Committee
comprised of members of the Compensation Committee of the Board of
Directors or the Board of Directors, as the case may be. Under the
plan, the Stock Award Committee may award, in addition to stock
options, shares of Common Stock on a restricted basis. The plan also
specifically provides for stock appreciation rights and authorizes
the Stock Award Committee to provide, either at the time of the grant
of an option or otherwise, that the option may be cashed out upon
terms and conditions to be determined by the Committee or the Board.
Only stock options, which for the most part contain limited stock
appreciation rights in connection with a change of control followed
by certain subsequent events, have been granted under the plan. The
plan terminates on January 31, 2002. Stockholders have approved the
purchase of up to 3,929,841 shares under the plan.
15. Employees Stock Plans, Continued
Changes in options outstanding under the plan during the years ended
June 30, 1993, 1994 and 1995 are as follows:
Number of
Options Price Per Option
Outstanding at June 30, 1992 987,316 $ .10 - $58.75
Granted 759,663 $ 2.13 - $ 6.50
Exercised (2,140) $ 1.88 - $ 4.38
Canceled (41,648) $ 1.88 - $53.75
Outstanding at June 30, 1993 1,703,191 $ .10 - $58.75
Granted 1,787,596 $ 1.63 - $ 3.31
Exercised (283) $ 1.88 - $ 2.13
Canceled (697,663) $ 1.88 - $58.75
Outstanding at June 30, 1994 2,792,841 $ .10 - $56.25
Granted 3,128,942 $ .875 - $ 2.12
Exercised - -
Canceled (2,685,080) $ 1.63 - $45.00
Outstanding at June 30, 1995 3,236,703 $ .10 - $56.25
Included in the 3,128,942 options granted in fiscal year 1995 are
1,917,493 options granted in a stock option repricing program. The
stock option repricing program was effected on March 1, 1995 and
provided for the repricing of stock options held by current employees
and members of the Board of Directors to an exercise price equal
to the net asset book value per share at December 31, 1994 (the latest balance
sheet date prior to the grant) and the cancellation of
a like number of previously granted stock options without restarting
the vesting schedule associated with the canceled options or
extending the term.
Included in the 1,787,596 options granted in fiscal year 1994 are
777,850 options granted in consideration of the eight-month deferral
of worldwide annual merit salary increases and 117,728 options
granted in consideration of the cancellation of a like number of
previously granted stock options and the restarting of the vesting
schedule associated with the canceled options.
Options with respect to 1,413,937 shares of common stock, with an
average exercise price of $2.20, were exercisable at June 30, 1995.
The Company has an Employee Stock Purchase Plan (the "Purchase Plan")
pursuant to which the Company is authorized to grant rights to
employees to purchase up to an aggregate of 1,000,000 shares of
common stock in a series of offerings, each of which generally lasts
six to twelve months. Unless extended by the stockholders, the
Purchase Plan expires December 31, 1997. Substantially all employees
are eligible to participate in the Purchase Plan. The purchase price
of shares of common stock is limited to the lesser of 85% of the fair
market value of the common stock on the commencement of the offering
and the last day of the offering. As of June 30, 1995, the Company
had issued 390,522 shares and had 609,478 shares of common stock
available for issuance pursuant to the Purchase Plan.
16. Rights Plan
On July 31, 1992, the Board of Directors of the Company declared a
dividend distribution of one Series A Participating Cumulative
Preferred Right for each share of the Company's common stock and
Convertible Preferred Stock. The dividend was made to stockholders
of record on August 14, 1992. Under the rights plan, each Right
becomes exercisable unless redeemed (1) after a third party owns 20%
or more of the outstanding shares of the Company's voting stock and
engages in one or more specified self-dealing transactions, (2) after
a third party owns 30% or more of the outstanding voting stock or (3)
following the announcement of a tender or exchange offer that would
result in a third party owning 30% or more of the Company's voting
stock. Any of these events would trigger the rights plan and entitle
each right holder to purchase from the Company one one-hundredth of a
share of Series A Participating Cumulative Preferred Stock at a cash
price of $30 per right.
Under certain circumstances following satisfaction of third party
ownership tests of the Company's voting stock, upon exercise each
holder of a right would be able to receive common stock of the
Company or its equivalent, or common stock of the acquiring entity,
in each case having a value of two times the exercise price of the
right. The rights will expire on August 14, 2002 unless earlier
exercised or redeemed, or earlier termination of the plan.
The adoption of the plan reinstated a similar rights plan put in
place in July 1989, which was terminated in connection with the
recapitalization of the Company in November 1991 to avoid its
inadvertent trigger.
17. Quarterly Consolidated Financial Information (Unaudited)
The following is a summary of quarterly financial results for the years
ended June 30, 1995 and 1994:
(Dollars in thousands, except per share amounts)
1995
Three Months Ended
September December March June
30, 1994 31, 1994 31, 1995 30, 1995
Net sales $41,508 $37,786 $30,344 $30,506
Gross margin $18,777 $17,286 $11,384 $13,220
Net income (loss) (a) $1,674 $1,040 $(4,985) $265
Net income (loss) per share $0.06 $0.03 $(0.17) $0.01
17. Quarterly Consolidated Financial Information (Unaudited), Continued
(a) Net income/(loss) for the three months ended March 31, and June
30, 1995 reflect a provision for restructuring of $2.7 and $0.5
million, respectively. Net income for the three months ended December
31, 1994 reflects a sales and use tax credit of $1,000,000. Net
income for the three months ended June 30, 1995 reflects an adjustment
to inventory reserves of $0.9 million.
1994
Three Months Ended
September December March June
30, 1993 31, 1993 31, 1994 30, 1994
Net sales $49,360 $40,688 $44,059 $44,924
Gross margin $22,852 $15,783 $17,531 $19,875
Income (loss) before
extraordinary loss and
cumulative effect of
change in accounting
principles $(11,015) $(3,492) $579 $2,297
Net income (loss) (a) $(39,208) $(3,492) $579 $2,297
Income (loss) per share: (b)
Income (loss) before
extraordinary loss and
cumulative effect of
change in accounting
principles $(0.47) $(0.12) $0.02 $0.08
Net income (loss) $(1.67) $(0.12) $0.02 $0.08
(a) Net loss for the three months ended September 30, 1993 reflects an
extraordinary loss on early extinguishment of debt of $23,193,000
($0.99 per share), a cumulative effect of change in accounting
principles of $5.0 million ($0.21 per share) and a provision for
restructuring of $12.0 million. Net loss for the three months ended
December 31, 1993 reflects a sales and use tax credit of $1,440,000.
Net income for the three months ended June 30, 1994 reflects an
adjustment to inventory reserves of $1.5 million.
17. Quarterly Consolidated Financial Information (Unaudited), Continued
(b) Net income (loss) per share when added does not equal the reported
fiscal year amount primarily due to the effect on average shares
outstanding from the issuance of 324,377 shares of common stock during
the three months ended September 30, 1993 in connection with the
annual contribution to the Company's retirement savings plan for
fiscal year 1993 and the issuance of 19,700,000 shares of common stock
and the conversion of 6,981,706 shares of Convertible Preferred Stock
to common stock during the three months ended September 30, 1993 in
connection with the 1993 Refinancing (see Note 4).
18. Commitments and Contingencies
The Company leases certain sales and service offices, warehousing, and
equipment. The leases expire at various dates through 2005 and
generally provide for the payment of taxes, insurance and maintenance
costs. Additionally, certain leases contain escalation clauses which
provide for increased rents resulting from the pass through of
increases in operating costs, property taxes and consumer price
indexes.
At June 30, 1995, future minimum payments under noncancelable operating
leases for the fiscal years ending June 30 of each year are as follows:
(Dollars in thousands)
1996 $ 4,551
1997 3,127
1998 1,753
1999 146
2000 90
2001 and thereafter 182
$ 9,849
Rent expense amounted to $6,686,000, $8,369,000, and $9,731,000 for the
years ended June 30, 1995, 1994 and 1993, respectively.
The Company, from time to time, is involved in litigation incidental
to the conduct of its business. The Company and its counsel believe
that such pending litigation will not have a material adverse effect
on the Company's results of operations or financial condition.
Additionally, the U.S. government has asserted that the Company's
prices for shipments of spare parts prior to 1994 under the U.S.
Department of Commerce's Next Generation Weather Radar (NEXRAD)
program were too high. No claim or action has been filed against the
Company. The Company believes that its pricing practices are in
compliance with applicable regulations and intends to vigorously
defend against any claim. Although there can be no assurance, the
Company expects that any resolution of the matter will not have a
material adverse affect on the Company's financial condition or
liquidity.
18. Commitments and Contingencies, Continued
The Company has entered into employment agreements with its executive
officers. In the event an executive officer is terminated directly by
the Company without cause or in certain circumstances constructively by
the Company, the terminated officer will be paid severance compensation
for a one-year period (a two-year period in the case of the Chief
Executive Officer) in an annualized amount equal to the respective
officer's annual salary then in effect plus an amount equal to the then
most recent annual bonus paid or, if determined, payable, to such
officer. At June 30, 1995, the maximum contingent liability under
these agreements is approximately $1.9 million. The Company's
employment agreements with its executive officers contain certain
offset provisions, as defined in their respective agreements.
On May 5, 1992, the Company completed the sale of its Cork, Ireland
facility to the Industrial Development Authority (the "IDA"). Under
the terms of this agreement, the Company is required to maintain its
European service/repair center in Ireland through April 30, 1998 and
maintain minimum employment levels. In the event the Company does not
meet these requirements, the IDA may require payment of up to
approximately $590,000 (360,000 Irish pounds). The Company's
contingent obligation to the IDA is collateralized by the machinery and
equipment of the Company's Ireland subsidiary.
19. Subsequent Event
On September 26, 1995, the Company entered into a contract providing
for the sale/leaseback of its Oceanport, New Jersey facility. The
transaction is expected to close during the quarter ending December 31,
1995. The $15 million sales price will be reduced by estimated selling
costs of approximately $1.0 million. A portion of the net proceeds will
be applied
to the remaining outstanding balance of the Term Loan (approximately
$9.3 million). The remainder of the net proceeds will be then
available for working capital purposes. However, there can be no
assurance that the transaction will be completed as contemplated.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
During fiscal year 1995, the Company continued to experience a decline
in net sales. Sales cycles in many of the Company's markets tend to be
protracted thus delaying certain orders and revenues. In addition,
intense competition, rapid advances in technology, government spending
levels and general economic conditions impact the Company's business.
Despite the decline, operating income improved by approximately $9.1
million and net cash from operations improved by approximately $4.1
million as a result of the Company's productivity improvements,
restructuring and ongoing cost reduction initiatives. The Company
continues to manage its resources and to focus its revenue generating
activities with the objectives to achieve growth and improve
profitability. In addition, the Company continues to pursue various
additional financing alternatives, including a sale/leaseback of its
Oceanport, New Jersey facility, to improve its financial flexibility. The
Company believes that it will be able to meet its obligations when due
through its operating and financing efforts.
During the second half of fiscal year 1995, revenues from international
markets exceeded those of North America. International sales and business
opportunities for the Company's standards based, POSIX compliant MAXION
multiprocessor system appear to be gaining momentum. The decline in North
America business is due to the anticipated decline in sales of proprietary
systems, reduced shipments under the U.S. Department of Commerce's Next
Generation Weather Radar (NEXRAD) program and less than anticipated open
systems business. The Company is pursuing a number of major program
opportunities for its MAXION systems. Prospects are promising but
uncertain. Given the long (6-18 months) selling cycle for such programs,
the benefits from such programs may not be realized for more than six
months.
The Company's objective is to increase revenues by providing real-time
computer systems and services to its installed base of proprietary systems
and to its open systems target markets. The achievement of these
objectives requires that the Company continue to enhance its proprietary
hardware and operating system platforms, while investing in the
development of its real-time open system hardware and operating systems
and providing industry standard product enhancements, such as networking,
graphics and data acquisition. The future growth of the Company's
business and its future financial performance will depend, to a
significant extent, upon its ability to continue to develop and market
competitive open systems which meet the real-time computing needs of its
targeted customers.
One of the goals of the Company's strategy is to minimize the effect of
the anticipated decline in sales of the Company's proprietary systems and
traditional maintenance and support services, while increasing sales of
its open systems and associated services. Since the average selling price
of an open system is considerably less than the average selling price of a
proprietary system, the number of total systems sold must increase to
maintain and grow revenues. A shift in sales from proprietary systems,
however, is likely to result in lower gross margins as the gross margins
on open systems are currently lower than gross margins on proprietary
systems. The Company's operating income would be adversely affected by
such a shift unless total net sales increase, the gross margins on its
open systems improve and/or total operating expenses are further reduced.
Although there can be no assurance that this will be the case, the Company
believes gross margins on its open systems will improve as the shift to
customer purchases of larger multiprocessor and server-class systems
increases.
Selected Operating Data as a Percentage of Net Sales
The Company considers its computer systems and service business
(including maintenance, support and training) to be one class of products
which accounted for the percentages of net sales set forth below. The
following table sets forth selected operating data as a percentage of net
sales for certain items in the Company's consolidated statements of
operations for the periods indicated.
1995 1994* 1993*
Net sales:
Computer systems 51.4% 56.0% 60.3%
Service and other 48.6 44.0 39.7
Total net sales 100.0 100.0 100.0
Cost of sales (% of respective sales category):
Computer systems 53.6 54.3 45.1
Service and other 60.0 61.6 63.5
Total cost of sales 56.7 57.5 52.4
Gross margin 43.3 42.5 47.6
Operating expenses:
Research and development 13.9 13.3 12.2
Selling, general and administrative 26.3 27.2 26.9
Provision for restructuring 2.3 6.7 -
Sales and use tax credit (0.7) (0.8) -
Total operating expenses 41.8 46.4 39.1
Operating income (loss) 1.5 (3.9) 8.5
Interest expense (1.9) (1.9) (6.1)
Interest income 0.4 0.3 0.5
Other non-recurring charge (0.7) - -
Other income (expense) - net 0.5 (0.3) (0.1)
Income (loss) before provision for income
taxes, extraordinary loss and cumulative
effect of change in accounting principles (0.2) (5.8) 2.8
Provision for income taxes 1.2 0.7 1.0
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principles (a) (1.4)% (6.5)% 1.8%
* Reclassified to conform to current year presentation.
(a) The percentage for the year ended June 30, 1994 excludes a $23.2
million extraordinary loss on early extinguishment of debt and a $5.0
million non-cash charge for the cumulative effect of change in accounting
principles.
Results Of Operations
Fiscal Year 1995 in Comparison to Fiscal Year 1994
Net Sales
Net sales for fiscal year 1995 were $140.1 million, a decrease of $38.9
million from fiscal year 1994. This decrease was due to a decrease of
$28.2 million, or 28.1%, in computer systems sales and a decrease of $10.7
million, or 13.5%, in service and other revenues. The decrease in computer
system sales was primarily due to the anticipated decline in sales of
proprietary systems and reduced shipments under the U.S. Department of
Commerce's Next Generation Weather Radar (NEXRAD) program. Although sales
of open systems remained constant, sales of the Company's MAXION open
systems increased while sales of other open systems declined. The decrease
in service and other revenues was primarily due to the decline in computer
system sales experienced in prior periods which resulted in fewer
maintenance contracts and a decline in renewal rates on maturing contracts
partially offset by approximately $3.3 million related to the impact of
favorable foreign exchange rates.
Gross Margin
Gross Margin, as measured in dollars and as a percentage of net sales,
was $60.6 million and 43.3%, respectively, for fiscal year 1995 compared
to $76.0 million and 42.5%, respectively, for fiscal year 1994. The
decrease in gross margin dollars was primarily due to the aforementioned
decline in net sales partially offset by cost savings resulting from the
operational restructurings implemented during fiscal year 1994 and fiscal
year 1995. The increase in gross margin as a percentage of net sales was
primarily due to cost savings resulting from the operational
restructurings implemented during fiscal year 1994 and fiscal year 1995
partially offset by the decline in net sales.
Operating Income
Operating income for fiscal year 1995 was $2.1 million compared to
operating loss of $7.0 million for fiscal year 1994. The $9.1 million
increase in operating income was due to a $16.1 million reduction in
operating expenses and a net reduction of $8.8 million in the provision
for restructuring (a $3.2 million provision for restructuring in the
current year offset by a $12.0 million provision for restructuring in the
prior year) partially offset by the $15.4 million decrease in gross margin
and a $0.4 million reduction in the sales and use tax credit as compared
to a similar credit in the prior year. The sales and use tax credit in
both periods relates to a change in the estimate of state sales and use
tax reserves based on a final state audit determination.
The $16.1 million decrease in operating expenses was primarily due to a
$11.7 million decrease in selling, general and administrative expenses and
a $4.4 million decrease in net research and development expenses. The
$4.4 million decrease in net research and development expenses reflects a
$5.8 million decrease in gross research and development expenses partially
offset by a $1.4 million decrease in the amount of software production
costs which were capitalized during the period. The decrease in selling,
general and administrative and gross research and development expenses is
primarily due to cost savings resulting from the operational
restructurings implemented during fiscal year 1994 and fiscal year 1995.
Income (Loss) Before Extraordinary Gain (Loss) and Cumulative Effect of
Change in Accounting Principles
Loss before extraordinary loss and cumulative effect of change in
accounting principles was $2.0 million for fiscal year 1995 compared to a
loss of $11.6 million for fiscal year 1994. The $9.6 million change
results from the $9.1 million increase in operating income and a $0.5
million net decrease in non-operating expenses. The decrease in non-
operating expenses was primarily due to a $0.8 million decrease in
interest expense resulting from the reduction of the Company's
indebtedness, a $0.6 million increase in income related to minority
interest and a $0.5 million decrease in foreign exchange losses partially
offset by a $1.0 million other non-recurring charge incurred in the
current year period and a $0.4 million increase in the provision for
income taxes. The $1.0 million other non-recurring charge incurred in the
current year was a result of an adjustment of the carrying value of the
Company's Tinton Falls, New Jersey facility to its net realizable value
based on current market conditions. The increase in the provision for
income taxes relates primarily to international operations.
Fiscal Year 1994 in Comparison to Fiscal Year 1993
Net Sales
Net sales for fiscal year 1994 were $179.0 million, a decrease of $41.4
million from fiscal year 1993. This decrease was due to a decrease of
$32.6 million, or 24.5%, in computer systems sales and a decrease of $8.8
million, or 10.1%, in service and other revenues. The decrease in
computer system sales was primarily due to a decline in worldwide business
resulting from declines and delays in certain government spending around
the world, including shipments of spare parts under the U.S. Department of
Commerce's Next Generation Weather Radar (NEXRAD) program, and the highly
competitive nature of the real-time computer industry. The decrease in
service and other revenues was primarily due to the decline in computer
system sales experienced in prior periods which resulted in fewer
maintenance contracts, a decline in renewal rates on maturing contracts
and approximately $0.7 million related to the impact of unfavorable
foreign exchange rates.
Gross Margin
Gross margin, as measured in dollars and as a percentage of net sales,
was $76.0 million and 42.5%, respectively, for fiscal year 1994 compared
to $104.8 million and 47.6%, respectively, for fiscal year 1993. The
decrease in gross margin dollars and percentage was primarily due to the
aforementioned decline in net sales, unfavorable discounting of older
products, unfavorable product mix and manufacturing expenses associated
with the ramp-up of full-scale production of the MAXION multiprocessor
system partially offset by cost savings resulting from the operational
restructuring during fiscal year 1994.
Operating Income
Operating loss for fiscal year 1994 was $7.0 million compared to
operating income of $18.7 million for fiscal year 1993. The $25.7 million
decrease in operating income was due to the aforementioned $28.8 million
decrease in gross margin and a $12.0 million provision for restructuring
partially offset by a sales and use tax credit of $1.4 million related to
a change in the estimate of state sales and use tax reserves and a $13.7
million reduction in operating expenses.
The $13.7 million decrease in operating expenses was primarily due to a
$10.6 million decrease in selling, general and administrative expenses, a
$1.5 million decrease in gross research and development expenses and a
$1.5 million increase in capitalized software production costs. The
decrease in selling, general and administrative and gross research and
development expenses is primarily due to cost savings resulting from the
operational restructuring during fiscal year 1994 and the completion of
extensive development effort on the MAXION multiprocessor system.
Income (Loss) Before Extraordinary Gain (Loss) and Cumulative Effect of
Change in Accounting Principles
Loss before extraordinary gain (loss) and cumulative effect of change
in accounting principles was $11.6 million for fiscal year 1994 compared
to income of $3.9 million for fiscal year 1993. The $15.5 million change
results from the aforementioned $25.7 million decrease in operating income
partially offset by a $10.2 million net decrease in non-operating
expenses. The decrease in non-operating expenses was primarily due to a
$10.1 million decrease in interest expense resulting from the reduction of
the Company's indebtedness and a decrease in the provision for income
taxes partially offset by an increase in foreign exchange losses.
Financial Resources and Liquidity
The liquidity of the business is dependent on many factors, including
sales volume, operating profit ratio, debt service and the efficiency of
asset utilization and turnover. The future liquidity of the Company's
business will depend to a significant extent on: 1) the actual versus
anticipated decline in sales of proprietary systems and traditional
services; 2) its ongoing cost control efforts; 3) its ability to
generate significant revenue growth from its open systems; and 4) access
to additional sources of financing and/or equity, if necessary.
The liquidity of the business is also affected by: 1) the timing of
shipments which predominantly occur during the last month of the quarter;
2) the increasing percentage of sales derived from outside of the United
States where there is generally longer accounts receivable collection
patterns; 3) the sales level in the United States where related accounts
receivable are included in the borrowing base of the Company's revolving
credit facility; 4) the number of countries in which the Company operates
resulting in the requirement to maintain minimum cash levels in each
country; and 5) restrictions in some countries where the Company operates
which limit its ability to repatriate cash.
As of June 30, 1995, the Company had a current ratio of 1.04 to 1,
an inventory turnover ratio of 4.9 times and net working capital of $1.9
million. At June 30, 1995, cash and cash equivalents amounted to $5.7
million and accounts receivable amounted to $25.5 million.
On June 29, 1995, the Company completed a refinancing of its then
outstanding $15.4 million existing bank term loan (the "Existing Term
Loan"), excluding up to $3.0 million in standby letters of credit in
connection with overseas lines of credit which remain in place. In
connection with this refinancing, the Company has entered into a new
agreement providing for a $18.0 million credit facility. The facility
includes a $10.0 million term loan (the "Term Loan") and a $8.0 million
revolving credit facility (the "Revolver"). The completion of the
refinancing of the bank term loan provides the Company with greater
financial flexibility with respect to its debt service payments and
financial covenant compliance requirements. The terms of the Existing
Term Loan would have required the Company to make a final payment of $12.0
million at maturity on October 1, 1995.
At June 30, 1995, the outstanding balances under the Term Loan and
the Revolver were $10.0 and $5.8 million, respectively. The
outstanding balance of the Revolver has been classified as a current
liability at June 30, 1995. Both the Term Loan and the Revolver bear
interest at the prime rate plus 2.0%. The Term Loan is payable in 36
equal monthly installments of $139,000 each, commencing August 1, 1995,
with a final payment of approximately $5.0 million payable August 1,
1998. The Revolver may be repaid and reborrowed, subject to certain
collateral requirements, at any time during the term ending August 1,
1998. The Company has pledged substantially all of its domestic assets
as collateral for the Term Loan and the Revolver. The Company may repay
the Term Loan at any time without penalty. In the event of a sale or
sale/leaseback of its Oceanport and Tinton Falls facilities, the Company
is required to make a prepayment of the Term Loan up to an amount equal
to 75% of the net sale proceeds. Certain early termination
fees apply if the Company terminates the facility in its entirety prior
to August 1, 1998.
In connection with the restructuring of its operations, the Company
recorded a provision for restructuring of $2.7 million and $0.5 million
during the quarters ended March 31, 1995 and June 30, 1995, respectively.
The restructuring provision includes employee terminations of
approximately 175 worldwide employees in positions ranging from the staff
level to the middle management level, office closings or downsizings and
other related costs which represented approximately 60%, 30% and 10% of
the provision, respectively. The Company estimates that the cost savings
related to the restructuring of its operations will be approximately $2.7
million per quarter when fully realized. Such savings began during the
third quarter of fiscal year 1995 and will be fully realized during the
first quarter of fiscal year 1996. Total cash savings began during the
quarter ending June 30, 1995 and will not be substantially realized until
the quarter thereafter primarily due to employee termination costs.
During the year ended June 30, 1995, the actual cash payments related to
the 1995 restructurings amounted to approximately $2.4 million and were
primarily related to employee termination costs. The Company believes
that it will be able to fund the cash outlays through cash flow from
operations and effective cash management.
Although management believes that improvements in cash flow will result
from the refinancing of the bank term loan, restructuring of operations
and other actions which will enhance the Company's ability to manage its
cash requirements, the short term prospects for the Company's liquidity
are dependent to a significant degree upon the level and stability of
revenue from sales and service of its computer systems and the Company's
ongoing cost control actions. The Company plans to continue to evaluate
and manage its resources to anticipated revenue levels to achieve improved
profitability and quarter to quarter revenue growth during fiscal year
1996. The Company is also pursuing various additional financing
alternatives including a sale or sale/leaseback of its facilities. On
September 67, 1995, the Company entered into a
contract providing for the sale/leaseback of its Oceanport, New Jersey
facility. The transaction is expected to close during the quarter ending
December 31, 1995. The $15 million sales price will be reduced by
estimated selling costs of approximately $1.0 million. A portion of the
net proceeds.
Accordingly, the net proceeds will be applied to the remaining outstanding
balance of the Term Loan (approximately $9.3 million). The remainder of
the net proceeds will be then available for working capital purposes. The
Company believes that it will be able to meet its obligations when due
through its operating and financing efforts. However, there can be no
assurance that the Company's operating and financing efforts will be
achieved.
CONCURRENT COMPUTER CORPORATION
SELECTED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share amounts)
Years Ended June 30,
Income Statement Data 1995 1994 1993 1992 1991
Net sales $140,144 $179,031 $220,464 $221,572 $254,945
Gross margin 60,667 76,041 104,841 104,711 93,659
Operating income (loss) 2,082 (6,993) 18,738 16,783 (33,922)
Income (loss) before
extraordinary gain (loss)
and cumulative effect
of change in accounting
principles (2,006) (11,631) 3,869 (955) (66,834)
Net income (loss) ($2,006) ($39,824) $3,869 $60,147 ($66,834)
Income (loss) per share:
Income (loss) before
extraordinary gain (loss)
and cumulative effect
of change in accounting
principles ($0.07) ($0.41) $0.40 ($0.13) ($35.46)
Net income (loss) ($0.07) ($1.42) $0.40 $8.00 ($35.46)
At June 30,
Balance Sheet Data 1995 1994 1993 1992 1991
Cash and short-term
investments $5,728 $9,374 $30,422 $20,611 $23,439
Working capital 1,865 (616) 36,673 22,742 (146,937)
Total assets 98,359 123,170 157,086 158,136 213,351
Long-term debt 9,536 13,240 67,938 61,613 2,131
Redeemable preferred stock - - - - 900
Stockholders' equity
(deficiency) 35,170 35,048 18,503 14,739 (69,195)
Book value per share $1.16 $1.18 $1.94 $1.61 ($36.15)
Schedule II
Concurrent Computer Corporation
Valuation and Qualifying Accounts
For the Years Ended June 30, 1995 1994 and 1993
(Dollars in thousands)
Balance at Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Deductions (a) of Year
Reserves and allowances
deducted from asset
accounts:
1995
Reserve for inventory
obsolescence and
shrinkage $ 6,138 $ 5,037 $(2,712)(b) $ 81 $ 8,544
Allowance for
doubtful accounts 3,405 130 (2,117)(c) 16 1,434
1994
Reserve for inventory
obsolescence and
shrinkage $ 3,167 $ 4,461 $(1,753)(b) $ 263 $ 6,138
Allowance for
doubtful accounts 2,173 2,114 (882)(c) - 3,405
1993
Reserve for inventory
obsolescence and
shrinkage $ 1,662 $ 1,840 $ (335)(b) $ - $ 3,167
Allowance for
doubtful accounts 2,121 52 - - 2,173
(a) Includes adjustments to the reserve account and allowance for
doubtful accounts for foreign currency translation.
(b) Charges and adjustments to the reserve account primarily for
inventory write-offs.
(c) Charges to the reserve account for uncollectible amounts written off
and credits issued during the year.
Exhibit 11.0
Concurrent Computer Corporation
Exhibit 11
Primary and Fully Diluted Earnings Per Share Computation
(Dollars and shares in thousands, except per share amounts)
Years ended June 30,
1995 1994 1993
Income (loss) before extraordinary loss
and cumulative effect of change in
accounting principles principles ($2,006) ($11,631) $ 3,869
Extraordinary loss on early
extinguishment of debt - (23,193) -
Cumulative effect of change in
accounting principles - (5,000) -
Net income (loss) ($2,006) ($39,824) $ 3,869
Weighted average number of common shares 30,095 28,054 2,367
Increase in weighted average number of
common shares upon assumed
conversion of preferred stock - - 6,982
Increase in weighted average number of
common shares upon assumed
exercise of stock options - - 416
Total 30,095 28,054 9,765
Income (loss) per share:
Income (loss) before extraordinary loss
and cumulative effect of change in
accounting principles ($0.07) ($0.41) $0.40
Extraordinary loss on early
extinguishment of debt - (0.83) -
Cumulative effect of change in
accounting principles - (0.18) -
Net income (loss) ($0.07) ($1.42) $ 0.40
Exhibit 22.0
CONCURRENT COMPUTER CORPORATION SUBSIDIARIES
SUBSIDIARY NAME JURISDICTION OF
INCORPORATION/ORGANIZATION
DOMESTIC
Concurrent Computer Corp. (France) Delaware, USA
Concurrent Computer Asia Corp. Delaware, USA
Concurrent Securities Corp. Massachusetts, USA
FOREIGN
Concurrent Computer Corp. Pty. Ltd. Australia
Concurrent Computer Belgium B.V./S.A. Belgium
Concurrent Computer Canada, Inc. Canada
Concurrent Computer France S.A. France
Concurrent Computer GmbH Germany
Concurrent Computer Hellas, EPE Greece
Concurrent Computer Hong Kong Limited Hong Kong
Concurrent Computer Ireland, Ltd. Ireland
Concurrent Computer Italia S.r.l. Italy
Concurrent Nippon Corporation Japan (60%)
Concurrent Nederland B.V. The Netherlands
Concurrent Computer New Zealand New Zealand
Concurrent Computer Far East Pte. Ltd. Singapore
Concurrent Computer Hispania, S.A. Spain
Concurrent Computer Holding Co. Ltd. United Kingdom
Concurrent Computer Nederland, Ltd. United Kingdom
Concurrent Computer Corporation, Ltd. United Kingdom
Concurrent Computer Scandinavia Limited United Kingdom
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financ8ial information extracted from the
Company's Consolidated Balance Sheet at June 30, 1995 and Consolidated Statement
of Operations for the twelve months ended June 30, 1995, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,728
<SECURITIES> 0
<RECEIVABLES> 26,890
<ALLOWANCES> 1,434
<INVENTORY> 14,510
<CURRENT-ASSETS> 49,997
<PP&E> 76,140
<DEPRECIATION> 37,573
<TOTAL-ASSETS> 98,359
<CURRENT-LIABILITIES> 48,132
<BONDS> 9,536
<COMMON> 302
0
0
<OTHER-SE> 34,868
<TOTAL-LIABILITY-AND-EQUITY> 98,359
<SALES> 72,074
<TOTAL-REVENUES> 140,144
<CGS> 38,639
<TOTAL-COSTS> 79,477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 130
<INTEREST-EXPENSE> 2,638
<INCOME-PRETAX> (306)
<INCOME-TAX> 1,700
<INCOME-CONTINUING> (2,006)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,006)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
Exhibit 10.7(g)
AMENDMENT NO. 6
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment No. 6, dated as of February 28, 1995, is between Concurrent
Computer Corporation (the "Company"), Fleet Bank of Massachusetts, N.A.
("Fleet")
and CIBC Inc. ("CIBC", together with Fleet, the "Lenders").
WHEREAS, the Company has requested that the Lenders agree to amend the
Second
Amended and Restated Credit Agreement dated as of July 21, 1993, as amended by
Amendment No. 1 to Second Amended and Restated Credit Agreement dated as of
September 28, 1993, Amendment No. 2 to Second Amended and Restated Credit
Agreement
dated as of November 10, 1993, Amendment No. 3 to Second Amended and Restated
Credit
Agreement dated as of November 18, 1993, Amendment No. 4 to Second Amended and
Restated Credit Agreement dated as of February 18, 1994 and Amendment No. 5 to
Second Amended and Restated Credit Agreement dated as of August 19, 1994 (the
"Credit Agreement") between the Company, the Lenders and Fleet, as Agent for the
Lenders:
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the Company and, pursuant to Section 12.04 of the Credit
Agreement, the Lenders hereby agree as follows:
1. Terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Credit Agreement.
2. Section 4.01 of the Credit Agreement is amended by replacing the text
thereof with the following:
"The Company hereby promises to pay directly to Fleet and to CIBC
the remaining outstanding principal balances due under their
respective Term Loans payable in equal installments of $360,119.05
and $327,380.95 respectively on May 31, 1995, June 30, 1995,
July 31, 1995, August 31, 1995 and September 15, 1995, with a final
balloon payment in the amount of all unpaid principal and accrued
interest due and payable on the Maturity Date."
3. Section 9.31 of the Credit Agreement is amended by replacing the text
thereof with the following:
"The Company will not permit Domestic Liquid Assets at the end of
each fiscal month to be less than the amount set forth below
opposite each such month.
Fiscal Month Ending Domestic Liquid Assets
February 28, 1995 $18,400,000
March 31, 1995 $18,400,000
April 30, 1995 $18,400,000
May 31, 1995 $17,700,000
June 30, 1995
and each fiscal month thereafter $17,000,000
For purposes hereof "Domestic Liquid Assets" shall mean the sum
of (a) domestic cash and cash equivalents, (b) Eligible Accounts
Receivable, and (c) domestic inventory."
4. The Company shall pay to the Lenders a restructuring and amendment
fee of
$100,000 ($52,380 to Fleet and $47,620 to CIBC), $50,000 of which shall be due
and
payable immediately, with the balance of such fee due and payable on or
before June
30, 1995.
5. The Company acknowledges and agrees that (a) as of the date hereof,
the
principal amount of the Term Loans equals $15,437,500.09, and (b) such amount
is due
and owing to the Lenders without offset, defense or counterclaim of any kind
or
nature.
6. The Company acknowledges and agrees that (a) the security interest
granted
to the Agent pursuant to the Amended Security Agreement constitutes a
perfected
first priority enforceable security interest in all of the personal
property of the
Company (other than personal property of the Company which is not
included in
"Collateral", as defined in such Agreement) which may be perfected by the
filing of
a UCC Financing Statement, including without limitation, accounts, inventory,
equipment and general intangibles, (b) pursuant to the Mortgage, the Agent has
an
enforceable first mortgage on the real property (and improvements
thereon and fixtures thereat) owned by the Company and located in Tinton Falls
and
Oceanport, New Jersey, (c) pursuant to the Pledge Agreements and the
instruments of
transfer executed in connection therewith, the Agent has a first priority
security
interest in the "Pledged Stock," as defined in each such Agreement, and (d) the
foregoing security interests and mortgage secure any and all of the obligations
of
the Company to the Lenders and/or Agent now existing or hereafter arising,
including
the obligations of the Company under, arising from or related to the Term
Loans and
L/C's.
7. Except as otherwise expressly provided above, (a) all terms and
conditions
of the Credit Agreement shall remain in full force and effect and are hereby
ratified and confirmed, and (b) the execution, delivery and effectiveness of
this
Amendment No. 6 shall not operate as a waiver of any right, power or remedy of
any
Lender or the Agent under any of the Basic Documents, nor constitute a waiver
of any
provision under any of such Documents.
8. The Company represents and warrants that other than with respect to
Section 8.04 of the Credit Agreement, (a) the representations and warranties
set
forth in the Credit Agreement and the Security Documents are true and accurate
as of
the date hereof, and (b) no Specified Event exists.
9. This Amendment No. 6 only shall be effective upon (a) the Company's
payment to Fleet and CIBC in immediately available funds of the first
installment of
the amendment and restructuring fee referenced in Paragraph 4 hereof, and (b)
receipt by the Agent of a legal opinion from the General Counsel of the Company
in
form and substance satisfactory to the Agent and Lenders.
10. This Amendment No. 6 may be executed in any number of counterparts,
all of
which taken together shall constitute one and the same instrument and any of
the
other parties hereto may execute this Amendment No. 6 by signing any such
counterpart. This Amendment No. 6 shall be governed by and construed in
accordance
with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 6 to be
duly
executed as of the date first above written.
CONCURRENT COMPUTER CORPORATION
By: /S/ Roger J. Mason
Roger J. Mason
FLEET BANK OF MASSACHUSETTS, N.A.
By: /S/ Gordon R. Massey
Gordon R. Massey
CIBC INC.
By: /S/ Tom R. Wagner
Tom R. Wagner
Exhibit 10.7(h)
AMENDMENT NO. 7
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment No. 7, dated as of March 31, 1995, is between Concurrent
Computer Corporation (the "Company"), Fleet Bank of Massachusetts, N.A.
("Fleet") and CIBC Inc. ("CIBC", together with Fleet, the "Lenders").
WHEREAS, the Company has requested that the Lenders agree to amend the
Second Amended and Restated Credit Agreement dated as of July 21, 1993, as
amended by Amendment No. 1 to Second Amended and Restated Credit Agreement
dated as of September 28, 1993, Amendment No. 2 to Second Amended and Restated
Credit Agreement dated as of November 10, 1993, Amendment No. 3 to Second
Amended and Restated Credit Agreement dated as of November 18, 1993, Amendment
No. 4 to Second Amended and Restated Credit Agreement dated as of February
18, 1994, Amendment No. 5 to Second Amended and Restated Credit Agreement
dated as of August 19, 1994 and Amendment No. 6 to Second Amended and Restated
Credit Agreement dated as of February 28, 1995 (the "Credit Agreement")
between the Company, the Lenders and Fleet, as Agent for the Lenders:
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the Company and, pursuant to Section 12.04 of the
Credit Agreement, the Lenders hereby agree as follows:
1. Terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Credit Agreement.
2. With respect to the fiscal quarter ending March 31, 1995, the
Lenders hereby waive the Company's obligations under Section 9.29 of the
Credit Agreement.
3. The Company acknowledges and agrees that (a) as of the date hereof,
the principal amount of the Term Loans equals $15,437,500.09, (b) such amount
is due and owing to the Lenders without offset, defense or counterclaim of any
kind or nature, and (c) on the date of any L/C Advance, the Company shall be
obligated to repay Fleet on such date (for its account and for the account of
CIBC to the extent CIBC has purchased a pro rata share of such Advance in
accordance with the terms of the Credit Agreement) the outstanding amount of
such Advance.
4. The Company acknowledges and agrees that (a) the security interest
granted to the Agent pursuant to the Amended Security Agreement constitutes a
perfected first priority enforceable security interest in all of the personal
property of the Company (other than personal property of the Company which is
not included in "Collateral", as defined in such Agreement) which may be
perfected by the filing of a UCC financing statement, including without
limitation, accounts, inventory, equipment and general intangibles, (b)
pursuant to the Mortgage, the Agent has an enforceable first mortgage on the
real property (and improvements thereon and fixtures thereat) owned by the
Company and located in Tinton Falls and Oceanport, New Jersey, (c)
pursuant to the Pledge Agreements and the instruments of transfer executed in
connection therewith, the Agent has a first priority security interest in the
"Pledged Stock," as defined in each such Agreement, and (d) the foregoing
security interests and mortgage secure any and all of the obligations of the
Company to the Lenders and/or Agent now existing or hereafter arising,
including the obligations of the Company under, arising from or related to the
Term Loans and the Standby L/C's (including the Company's obligations to repay
any L/C Advance to Fleet for its account and for the account of CIBC to the
extent CIBC has purchased a pro rata share of such Advance in accordance with
the terms of the Credit Agreement).
5. Except as otherwise expressly provided above, (a) all terms and
conditions of the Credit Agreement shall remain in full force and effect and
are hereby ratified and confirmed, and (b) the execution, delivery and
effectiveness of this Amendment No. 7 shall not operate as a waiver of any
right, power or remedy of any Lender or the Agent under any of the Basic
Documents, nor constitute a waiver of any provision under any of such
Documents.
6. The Company represents and warrants that other than with respect to
Section 8.04(i) of the Credit Agreement (a) the representations and warranties
set forth in the Credit Agreement and the Security Documents are true and
accurate as of the date hereof, and (b) no Specified Event exists.
7. This Amendment No. 7 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument and
any of the other parties hereto may execute this Amendment No. 7 by signing
any such counterpart. This Amendment No. 7 shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Amendment No.7 to be
duly executed under seal as of the date first above written.
CONCURRENT COMPUTER CORPORATION
By: /S/ Roger J. Mason
Roger J. Mason
FLEET BANK OF MASSACHUSETTS, N.A.
By: /S/ Gordon R. Massey
Gordon R. Massey
CIBC INC.
By: /S/ Tom R. Wagner
Tom R. Wagner
Exhibit 10.11
LOAN AND SECURITY AGREEMENT
by and between
CONCURRENT COMPUTER CORPORATION
and
FOOTHILL CAPITAL CORPORATION
Dated as of June 29, 1995
TABLE OF CONTENTS
{toc \f C |
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 16
1.3 Code 16
1.4 Construction 16
1.5 Schedules and Exhibits 16
2. LOAN AND TERMS OF PAYMENT 16
2.1 Revolving Advances. 17
2.2 Term Loan 18
2.3 Overadvances 18
2.4 Interest: Rates, Payments, and Calculations 18
2.5 Crediting Payments; Application of Collections 20
2.6 Statements of Obligations 20
2.7 Fees 20
2.8 Mandatory Prepayment Requirement 21
3. CONDITIONS; TERM OF AGREEMENT 22
3.1 Conditions Precedent to Initial Advance 22
3.2 Conditions Precedent to All Advances 24
3.3 Conditions Subsequent 25
3.4 Term; Automatic Renewal 25
3.5 Effect of Termination 25
3.6 Early Termination by Borrower 25
3.7 Termination Upon Event of Default 26
4. CREATION OF SECURITY INTEREST 26
4.1 Grant of Security Interest 26
4.2 Negotiable Collateral 27
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral 27
4.4 Delivery of Additional Documentation Required 27
4.5 Power of Attorney 27
4.6 Right to Inspect 28
5. REPRESENTATIONS AND WARRANTIES 28
5.1 No Prior Encumbrances 28
5.2 Eligible Accounts 29
5.3 Eligible Inventory 29
5.4 Location of Inventory and Equipment 29
5.5 Inventory Records 29
5.6 Location of Chief Executive Office; FEIN 29
5.7 Due Organization and Qualification; No Subsidiaries 29
5.8 Due Authorization; No Conflict 30
5.9 Litigation 30
5.10 No Material Adverse Change in Financial Condition 30
5.11 Solvency 30
5.12 Employee Benefits 31
5.13 Environmental Condition 31
5.14 Reliance by Foothill; Cumulative 32
6. AFFIRMATIVE COVENANTS 32
6.1 Accounting System 32
6.2 Collateral Reports 32
6.3 Schedules of Accounts 33
6.4 Financial Statements, Reports, Certificates 33
6.5 Tax Returns 34
6.6 Designation of Inventory 34
6.7 Returns 34
6.8 Title to Equipment 35
6.9 Maintenance of Equipment 35
6.10 Taxes 35
6.11 Insurance 35
6.12 Finacial Covenants 37
6.13 No Setoffs or Counterclaims 37
6.14 Location of Inventory and Equipment 37
6.15 Compliance with Laws 38
6.16 Employee Benefits 38
6.17 Leases 39
6.18 Repatriation ofForeign Earnings and Profits 39
6.19 Drawing of Letters of Credit 39
7. NEGATIVE COVENANTS. 39
7.1 Indebtedness. 39
7.2 Liens 40
7.3 Restrictions on Fundamental Changes 40
7.4 Extraordinary Transactions and Disposal of Assets 40
7.5 Change Name 41
7.6 Guarantee 41
7.7 Restructure 41
7.8 Prepayments 41
7.9 Repayments 41
7.10 Change of Control 41
7.11 Capital Expenditures 42
7.12 Consignments 42
7.13 Distributions 42
7.14 Accounting Methods 42
7.15 Investments 42
7.16 Transactions with Affiliates 43
7.17 Suspension 43
7.18 Compensation 43
7.19 Use of Proceeds 43
7.20 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees 44
7.21 Inactive Subsidiaries 44
7.22 Amendment of Credit Agreement 44
8. EVENTS OF DEFAULT 44
9. FOOTHILL'S RIGHTS AND REMEDIES 47
9.1 Rights and Remedies 47
9.2 Remedies Cumulative 48
10. TAXES AND EXPENSES 48
11. WAIVERS; INDEMNIFICATION 50
11.1 Demand; Protest; etc 50
11.2 Foothill's Liability for Collateral 50
11.3 Indemnification 50
12. NOTICES 50
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER 51
14. DESTRUCTION OF BORROWER'S DOCUMENTS 52
15. GENERAL PROVISIONS 52
15.1 Effectiveness 52
15.2 Successors and Assigns 52
15.3 Section Headings 53
15.4 Interpretation 53
15.5 Severability of Provisions 53
15.6 Amendments in Writing 53
15.7 Counterparts; Telefacsimile Execution 53
15.8 Revival and Reinstatement of Obligations 54
15.9 Integration 54
}
SCHEDULES AND EXHIBITS
Schedule E-1 Eligible Inventory
Schedule I-1 Inactive Subsidiaries
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 5.7 Capitalization
Schedule 5.9 Litigation
Schedule 5.13 Environmental Condition
Schedule 6.14 Location of Inventory and Equipment
Exhibit A-1 Acknowledgement Agreement
Exhibit C-1 Copyright Security Agreement
Exhibit E-1 Environmental Indemnity
Exhibit I-1 Intercreditor Agreement
Exhibit P-1 Patent Security Agreement
Exhibit S-1 Stock Pledge Agreement
Exhibit T-1 Trademark Security Agreement
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, is entered into as of June 29, 1995,
between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, and CONCURRENT
COMPUTER CORPORATION, a Delaware corporation ("Borrower"), with
its chief
executive office located at 2 Crescent Place, Oceanport, New
Jersey 07757.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the
following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may
become
obligated under, with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter
arising
accounts, contract rights, and all other forms of obligations
owing to
Borrower arising out of the sale, license, or lease of goods or
software or
the rendition of services by Borrower, or arising out of the sale,
license,
or lease of goods or software or the rendition of services by a
Person other
than Borrower and acquired by Borrower from such Person by
assignment or
purchase, irrespective of whether earned by performance, and any
and all
credit insurance, guaranties, or security therefor.
"Acknowledgement Agreement" means an Acknowledgement
Agreement,
dated as of June 29, 1995, between Borrower and each Subsidiary of
Borrower,
entered into for the benefit of Foothill, which agreement shall be
substantially in the form of Exhibit A-1 attached hereto.
"Affiliate" means, as applied to any Person, any other
Person
directly or indirectly controlling, controlled by, or under common
control
with, that Person. For purposes of this definition, "control" as
applied to
any Person means the possession, directly or indirectly, of the
power to
direct or cause the direction of the management and policies of
that Person,
whether through the ownership of voting securities, by contract,
or
otherwise.
"Agreement" means this Loan and Security Agreement and
any
extensions, riders, supplements, notes, amendments, or
modifications to or
in connection with this Loan and Security Agreement.
"Annualized Service Revenues" means, with respect to
the last
day of any fiscal quarter of Borrower, aggregate total revenues of
Borrower
and its Subsidiaries that are derived from Service Contracts for
the four
most recent fiscal quarters of Borrower (including such fiscal
quarter).
"Authorized Officer" means any officer or employee of
Borrower.
"Availability" means, as of the date of determination,
the
result (so long as such result is a positive number) of (a) the
lesser of
the Borrowing Base or the Maximum Revolving Amount, minus (b) the
outstanding Obligations that arise under Section 2.1 hereof.
"Average Unused Portion of Revolver Amount" means the
Maximum
Revolver Amount; less the average Daily Balance of advances made
by Foothill
under Section 2.1 that were outstanding during the immediately
preceding
month.
"Bankruptcy Code" means the United States Bankruptcy
Code (11
U.S.C. 101 et seq.), as amended, and any successor statute.
"Borrower" has the meaning set forth in the preamble
to this
Agreement.
"Borrower's Books" means all of Borrower's books and
records
including: ledgers; records indicating, summarizing, or
evidencing
Borrower's properties or assets (including the Collateral or the
Real
Property) or liabilities; all information relating to Borrower's
or its
Subsidiaries' business operations or financial condition; and all
related
computer programs, disc or tape files, printouts, runs, or other
computer
prepared information.
"Borrowing Base" has the meaning set forth in Section
2.1.
"Business Day" means any day that is not a Saturday,
Sunday, or
other day on which national banks are authorized or required to
close.
"Change of Control" shall be deemed to have occurred
at such
time as (a) a "person" or "group" (within the meaning of Sections
13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the
"beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934),
directly or indirectly, of more than 25% of the total voting power
of all
classes of stock then outstanding of Borrower normally entitled to
vote in
the election of directors, or (b) Borrower shall fail to own free
and clear
of any liens of any Person (other than Foothill or Old Lenders'
Agent) and
control (without being subject to any voting trust, voting
agreement,
shareholders agreement, or any other agreement or arrangement
limiting or
affecting the voting of such stock) at any time not less than one
hundred
percent (100.0%) of the outstanding voting stock of each of
Borrower's
Subsidiaries reflected as being owned by it as of the Closing Date
on
Schedule 5.7 and that such outstanding voting stock retains the
same
percentage of voting control as exists on the Closing Date.
"Closing Date" means the date of the initial advance
hereunder.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the
Accounts;
Borrower's Books; the Equipment; the General Intangibles; the
Inventory; the
Negotiable Collateral; any money, or other assets of Borrower
which now or
hereafter come into the possession, custody, or control of
Foothill; and the
proceeds and products, whether tangible or intangible, of any of
the
foregoing including proceeds of insurance covering any or all of
the
Collateral, and any and all Accounts, Borrower's Books, Equipment,
General
Intangibles, Inventory, Negotiable Collateral, money, deposit
accounts, or
other tangible or intangible property resulting from the sale,
license,
exchange, collection, or other disposition of any of the
foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Concurrent Nippon" means Concurrent Nippon
Corporation, a
company organized under the laws of Japan.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of
Borrower and
its Subsidiaries calculated on a consolidated basis that would, in
accordance with GAAP, be classified on a balance sheet as current
assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower
and its Subsidiaries, calculated on a consolidated basis that would, in
accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all advances outstanding
under this Agreement shall be deemed to be current liabilities without
regard to whether they would be deemed to be so under GAAP.
"Copyright Security Agreement" means a security agreement, dated
as of June 29, 1995, between Borrower and Foothill, which agreement shall be
substantially in the form of Exhibit C-1 attached hereto.
"Credit Agreement" means that certain Third Amended and Restated
Credit Agreement, dated as of June 29, 1995, between Borrower, Old Lenders'
Agent, and Old Lenders.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"Dilution Reserve" means, as of the date of any
determination, a
dollar amount sufficient to reduce Foothill's advance rate against
Eligible
Accounts by one (1) percentage point each for each percentage
point by which
the amount (expressed as a percentage point and based upon the
immediately
prior three months) of Borrower's Accounts that are subject to bad
debt
write-downs, credits, or other dilution is in excess of six
percent (6%).
"Early Termination Premium" has the meaning set forth
in Section
3.6.
"Eligible Accounts" means those Accounts created by
Borrower in
the ordinary course of business that arise out of Borrower's sale
of goods
or rendition of services, that strictly comply with all of
Borrower's
representations and warranties to Foothill, and that are and at
all times
shall continue to be acceptable to Foothill in all respects;
provided,
however, that standards of eligibility may be fixed and revised
from time to
time by Foothill in Foothill's reasonable credit judgment based
upon a
change in facts or circumstances or upon information that first
comes to
Foothill's attention after the Closing Date. Eligible Accounts
shall not
include the following:
(a) Accounts that the Account Debtor has
failed to pay
within ninety (90) days of invoice date or Accounts with selling
terms of
more than thirty (30) days (or, on a case by case basis, up to
sixty (60)
days with Foothill's prior consent) and all Accounts owed by an
Account
Debtor that has failed to pay fifty percent (50%) or more of its Accounts
owed to Borrower within ninety (90) days of invoice date;
(b) Accounts with respect to which the Account
Debtor is
an officer, employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods or
software are
placed on consignment, guaranteed sale, sale or return, sale on
approval,
bill and hold, or other terms by reason of which the payment by
the Account
Debtor may be conditional; provided, however, that bill and hold
Accounts
shall not be excluded by reason of this clause (c) if they are
subject to
documentation, in form and substance satisfactory to Foothill,
clearly
evidencing that the obligation of the Account Debtor is absolute
and
unconditional notwithstanding the failure of Borrower to deliver
the subject
goods or software;
(d) Accounts with respect to which the Account
Debtor is
not a resident of the United States, and which are not either (i) covered by
credit insurance in form and amount, and by an insurer,
satisfactory to
Foothill, or (ii) supported by one or more letters of credit that
are
assignable by their terms and have been delivered to Foothill in
an amount,
of a tenor, and issued by a financial institution, acceptable to
Foothill;
(e) Accounts with respect to which the Account
Debtor is
the United States or any department, agency, or instrumentality of
the
United States (exclusive, however, of Accounts with respect to
which
Borrower has complied, to the satisfaction of Foothill, with the
Assignment
of Claims Act, 31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is
or may
become liable to the Account Debtor for goods or software sold or
licensed
or services rendered by the Account Debtor to Borrower;
(g) Accounts with respect to an Account Debtor
whose
total obligations owing to Borrower exceed ten percent (10%) of
all Eligible
Accounts, to the extent of the obligations owing by such Account
Debtor in
excess of such percentage; provided, however, that accounts owed
by the
Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing
Co.,
Grumman Aircraft, Martin Marietta Corp., and other accounts that
may be
approved from time to time by Foothill may be eligible up to a maximum, per
Account Debtor, of fifteen percent (15%) of all Eligible Accounts,
so long
as they are otherwise eligible hereunder;
(h) Accounts with respect to which the Account
Debtor
disputes liability or makes any claim with respect thereto, or is
subject to
any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(i) Accounts the collection of which Foothill,
in its
reasonable credit judgment, believes to be doubtful by reason of
the Account
Debtor's financial condition;
(j) Accounts that are payable in other than
United
States Dollars;
(k) Accounts that represent progress payments
or other
advance billings that are due prior to the completion of
performance by
Borrower of the subject contract for goods, software, or services;
and
(l) Accounts in which any Person other than
Borrower
owns any interest, to the extent of such interest, or in which any
Person
other than Foothill holds a lien, security interest, or charge.
"Eligible Inventory" means Inventory consisting of raw
materials
and spare parts held for use in the ordinary course of Borrower's
business,
that are located at Borrower's premises identified on Schedule E-
1, are
acceptable to Foothill in all respects, and strictly comply with
all of
Borrower's representations and warranties to Foothill; provided,
however,
that standards of eligibility may be fixed and revised from time
to time by
Foothill in Foothill's reasonable credit judgment based upon a
change in
facts or circumstances or upon information that first comes to
Foothill's
attention after the Closing Date. Eligible Inventory shall not
include
Inventory that is used in connection with Borrower's proprietary
computer
system or that is expected to be returned from customers, finished
goods,
slow moving or obsolete items, restrictive or custom items, work-
in-process,
packaging and shipping materials, supplies used or consumed in
Borrower's
business, Inventory at any location other than those set forth on Schedule
E-1, Inventory subject to a security interest or lien in favor of any third
Person, bill and hold goods, Inventory that is not subject to Foothill's
perfected security interests, returned or defective goods, "seconds," and
Inventory acquired on consignment. Anything contained herein to the
contrary notwithstanding, Borrower shall be entitled, from time to time upon
reasonable prior notice to Foothill, to amend Schedule E-1 in order to add
one or more additional locations to Schedule E-1 that are set
forth on
Schedule 6.14, so long as in connection with such amendment
Borrower
provides to Foothill a landlord waiver, bailee letter, or a
similar
acknowledgement agreement of any warehouseman in possession of
Inventory, in
each case, in form and substance satisfactory to Foothill.
"Eligible Raw Materials Inventory" means Eligible
Inventory
consisting of raw materials. Eligible Raw Materials Inventory
shall be
valued, on a first in, first out basis, at the lower of Borrower's
cost or
market value.
"Eligible Spare Parts Inventory" means Eligible
Inventory
consisting of spare parts. Eligible Spare Parts Inventory shall
be valued,
on a first in, first out basis, at Borrower's net book value.
"Eligible Unearned Service Accounts" means Accounts
created by
Borrower in the ordinary course of business that qualify as
Eligible
Accounts except for the fact that they arise under Service
Contracts and
that the right to payment therefor has not yet accrued, provided,
however,
that only the rights to payment under such Service Contracts that
will
accrue within one (1) month from the date of determination shall
constitute
Eligible Unearned Service Accounts.
"Environmental Indemnity" means an environmental
indemnity
executed by Borrower in favor of Foothill, which agreement shall
be
substantially in the form of Exhibit E-1 attached hereto.
"Equipment" means all of Borrower's present and
hereafter
acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and
trailers),
tools, parts, dies, jigs, goods (other than consumer goods, farm
products,
or Inventory), wherever located, and any interest of Borrower in
any of the
foregoing, and all attachments, accessories, accessions,
replacements,
substitutions, additions, and improvements to any of the
foregoing, wherever
located.
"ERISA" means the Employee Retirement Income Security
Act of
1974, as amended from time to time, or any predecessor, successor,
or
superseding laws of the United States of America, together with
all
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether
or not
incorporated) which, within the meaning of Section 414 of the IRC,
is:
(i) under common control with Borrower; (ii) treated, together
with
Borrower, as a single employer; (iii) treated as a member of an
affiliated
service group of which Borrower is also treated as a member; or (iv) is
otherwise aggregated with the Borrower for purposes of the employee benefits
requirements listed in IRC Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan;
(ii) a Prohibited Transaction with respect to any Plan; (iii) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer
Plan; (iv) the complete or partial withdrawal of Borrower or an ERISA
Affiliate from a Qualified Plan during a plan year in which it was, or was
treated as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts which,
under the provisions of any Plan or applicable law, Borrower or any ERISA
Affiliate is required to make; (vi) the filing of a notice of intent to
terminate, or the treatment of a plan amendment as a termination, under
Sections 4041 or 4041A of ERISA; (vii) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer,
any
Qualified Plan or Multiemployer Plan; (viii) the imposition of any
liability
under Title IV of ERISA, other than PBGC premiums due but not
delinquent
under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate;
and
(ix) a violation of the applicable requirements of Sections 404 or
405 of
ERISA, or the exclusive benefit rule under Section 403(c) of
ERISA, by any
fiduciary or disqualified person with respect to any Plan for
which Borrower
or any ERISA Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in
Section 8.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble
to this
Agreement.
"Foothill Expenses" means all: reasonable,
documented, costs or
expenses (including taxes, photocopying, notarization,
telecommunication and
insurance premiums) required to be paid by Borrower under any of
the Loan
Documents that are paid or advanced by Foothill; documentation,
filing,
recording, publication, appraisal (including periodic Collateral
or Real
Property appraisals), real estate survey, environmental audit, and
search
fees assessed, paid, or incurred by Foothill in connection with
Foothill's
transactions with Borrower; costs and expenses incurred by
Foothill in the
disbursement of funds to Borrower (by wire transfer or otherwise);
charges
paid or incurred by Foothill resulting from the dishonor of
checks; costs
and expenses paid or incurred by Foothill to correct any default
or enforce
any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling,
licensing,
preparing for sale or license, or advertising to sell or license
the
Collateral or the Real Property, or any portion thereof,
irrespective of
whether a sale or license is consummated; costs and expenses paid
or
incurred by Foothill in examining Borrower's Books; costs and
expenses of
third party claims or any other suit paid or incurred by Foothill
in
enforcing or defending the Loan Documents; and Foothill's
reasonable
attorneys fees and expenses incurred in advising, structuring,
drafting,
reviewing, administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower
or any
guarantor of the Obligations), defending, or concerning the Loan
Documents,
irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently
applied.
"General Intangibles" means all of Borrower's present
and future
general intangibles and other personal property (including
contract rights,
rights arising under common law, statutes, or regulations, choses
or things
in action, goodwill, patents, trade names, trademarks,
servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists,
monies
due or recoverable from pension funds, route lists, rights to
payment and
other rights under any royalty or licensing agreements,
infringements,
claims, computer programs, computer discs, computer tapes,
software, source
code, literature, reports, catalogs, deposit accounts, insurance
premium
rebates, tax refunds, and tax refund claims), other than goods,
Accounts,
and Negotiable Collateral.
"Hazardous Materials" means all or any of the
following:
(a) substances that are defined or listed in, or otherwise
classified
pursuant to, any applicable laws or regulations as "hazardous substances,"
"hazardous materials," "hazardous wastes," "toxic substances," or
any other
formulation intended to define, list, or classify substances by
reason of
deleterious properties such as ignitability, corrosivity,
reactivity,
carcinogenicity, reproductive toxicity, or "EP toxicity"; (b) oil,
petroleum, or petroleum derived substances, natural gas, natural
gas
liquids, synthetic gas, drilling fluids, produced waters, and
other wastes
associated with the exploration, development, or production of
crude oil,
natural gas, or geothermal resources; (c) any flammable substances
or
explosives or any radioactive materials; and (d) asbestos in any
form or
electrical equipment which contains any oil or dielectric fluid
containing
levels of polychlorinated biphenyls in excess of fifty (50) parts
per
million.
"Inactive Subsidiaries" means those subsidiaries of Borrower
identified on Schedule I-1 attached hereto.
"Indebtedness" means: (a) all obligations of Borrower
or any
Subsidiary of Borrower for borrowed money; (b) all obligations of
Borrower
or any Subsidiary of Borrower evidenced by bonds, debentures,
notes, or
other similar instruments and all reimbursement or other
obligations of
Borrower or any Subsidiary of Borrower in respect of letters of
credit,
letter of credit guaranties, bankers acceptances, interest rate
swaps,
controlled disbursement accounts, or other financial products; (c)
all
obligations of Borrower or any Subsidiary of Borrower under
capital leases;
(d) all obligations or liabilities of others secured by a lien or
security
interest on any property or asset of Borrower or any Subsidiary of
Borrower,
irrespective of whether such obligation or liability is assumed;
and (e) any
obligation of Borrower or any Subsidiary of Borrower guaranteeing
or
intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or
sold with recourse to Borrower or any Subsidiary of Borrower) any
indebtedness, lease, dividend, letter of credit, or other obligation of any
other Person.
"Insolvency Proceeding" means any proceeding commenced
by or
against any Person under any provision of the Bankruptcy Code or
under any
other bankruptcy or insolvency law, including assignments for the
benefit of
creditors, formal or informal moratoria, compositions, extensions
generally
with its creditors, or proceedings seeking reorganization,
arrangement, or
other similar relief.
"Intercreditor Agreement" means an Intercreditor
Agreement,
dated as of June 29, 1995, between Foothill, on the one hand, and
Old
Lenders' Agent, on the other hand, and acknowledged by Borrower,
which
agreement shall be substantially in the form of Exhibit I-1
attached hereto.
"Inventory" means all present and future inventory in
which
Borrower has any interest, including goods and software held for
sale,
license, or lease or to be furnished under a contract of service
and all of
Borrower's present and future raw materials, work in process,
finished
goods, and packing and shipping materials, wherever located, and
any
documents of title representing any of the above.
"Inventory Reserve" means a reserve in an amount equal
to,
without duplication (a) an amount calculated to eliminate overhead
allocated
to the Eligible Raw Materials Inventory and Eligible Spare Parts
Inventory,
and (b) the amount of the inventory reserve set forth in
Borrower's general
ledger and calculated in accordance with its historical practices.
"IRC" means the Internal Revenue Code of 1986, as
amended, and
the regulations thereunder.
"Letters of Credit" means those certain letters of
credit in the
aggregate amount of Three Million Dollars ($3,000,000) issued by
Old
Lenders' Agent on behalf of the Old Lenders for the account of
Borrower and
to support the Indebtedness of Concurrent Nippon owing to Sumitomo
Bank,
Ltd., Mitsubishi Bank, Ltd., and Industrial Bank of Japan.
"Liquidity" means, as of any date of determination,
the
aggregate amount of Borrower's unrestricted cash, cash equivalents, and
Availability.
"Liquidity Conditions" means, as of any date of
determination,
that: (a) Borrower's Liquidity is not less than Two Million Five
Hundred
Thousand Dollars ($2,500,000); and (b) no Event of Default has
occurred and
is continuing.
"Loan Documents" means this Agreement, the Lockbox
Agreements,
the Mortgages, the Term Note, the Stock Pledge Agreement, the
Intercreditor
Agreement, the Copyright Security Agreement, the Patent Security
Agreement,
the Trademark Security Agreement, the Subsidiary Guaranty, the
Subsidiary
Security Agreement, the Source Code Escrow Agreement, the
Acknowledgement
Agreement, any other note or notes executed by Borrower and
payable to
Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Lockbox Account" shall mean the depositary account established
pursuant to the respective Lockbox Agreement.
"Lockbox Agreements" means those certain Lockbox
Operating
Procedural Agreements and those certain Depository Account
Agreements, in
form and substance satisfactory to Foothill, each of which is
among
Borrower, Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means First Interstate Bank and
Chemical Bank.
"Maximum Amount" means Eighteen Million Dollars ($18,000,000).
"Maximum Revolver Amount" means Eight Million Dollars
($8,000,000).
"Mortgages" means one or more mortgages, deeds of
trust, or
deeds to secure debt, executed by Borrower in favor of Foothill,
the form
and substance of which shall be satisfactory to Foothill, that
encumber the
Real Property and the related improvements thereto.
"Multiemployer Plan" means a multiemployer plan as
defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in
which
employees of Borrower or an ERISA Affiliate participate or to
which Borrower
or any ERISA Affiliate contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's
present and
future letters of credit, notes, drafts, instruments, certificated
and
uncertificated securities (including the shares of stock of
domestic
subsidiaries of Borrower, exclusive, however, of Borrower's
interest in
Concurrent Nippon and exclusive, however, of 34% of the stock of
each of
Borrower's controlled foreign subsidiaries), documents, personal
property
leases (wherein Borrower is the lessor), chattel paper, and
Borrower's Books
relating to any of the foregoing.
"Obligations" means all loans, advances, debts,
principal,
interest (including any interest that, but for the provisions of
the
Bankruptcy Code, would have accrued), premiums (including Early
Termination
Premiums), liabilities (including all amounts charged to
Borrower's loan
account pursuant to any agreement authorizing Foothill to charge
Borrower's
loan account), obligations, fees, lease payments, guaranties,
covenants, and
duties owing by Borrower to Foothill of any kind and description
(whether
pursuant to or evidenced by the Loan Documents, by any note or
other
instrument (including the Term Note), or pursuant to any other
agreement
between Foothill and Borrower, and irrespective of whether for the
payment
of money), whether direct or indirect, absolute or contingent, due
or to
become due, now existing or hereafter arising, and including any
debt,
liability, or obligation owing from Borrower to others that
Foothill may
have obtained by assignment or otherwise, and further including
all interest
not paid when due and all Foothill Expenses that Borrower is
required to pay
or reimburse by the Loan Documents, by law, or otherwise.
"Oceanport Real Property" means Borrower's Real
Property located
in Oceanport, New Jersey.
"Old Lenders" means Fleet Bank of Massachusetts, N.A.
and CIBC
Inc.
"Old Lenders' Agent" means Fleet Bank of
Massachusetts, N.A., as
agent for the Old Lenders.
"Overadvance" has the meaning set forth in Section
2.3.
"Patent Security Agreement" means a security
agreement, dated as
of June 29, 1995, between Borrower and Foothill, which agreement
shall be
substantially in the form of Exhibit P-1 attached hereto.
"Paydown Letter" means a letter, in form and substance
reasonably satisfactory to Foothill, from Old Lenders' Agent
respecting the
amount necessary to repay in full all of the obligations of
Borrower owing
to Old Lenders, other than the obligations with respect to the
Letters of
Credit.
"PBGC" means the Pension Benefit Guaranty Corporation
as defined
in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security
interests held
by Foothill; (b) liens for unpaid taxes that are not yet due and
payable;
(c) liens and security interests set forth on Schedule P-1
attached hereto;
(d) purchase money security interests and liens of lessors under
capital
leases to the extent that the acquisition or lease of the
underlying asset
was permitted under Section 7.11, and so long as the security
interest or
lien only secures the purchase price of the asset; (e) easements,
rights of
way, reservations, covenants, conditions, restrictions, zoning
variances,
and other similar encumbrances that do not materially interfere
with the use
or value of the property subject thereto; (f) obligations and
duties as
lessee under any lease existing on the date of this Agreement; (g)
mechanics', materialmen's, warehousemen's, or similar liens that
arise by
operation of law; (h) exceptions listed in the title insurance or
commitment
therefor to be delivered by Borrower hereunder in respect of the
Real
Property and as are approved in the sole discretion of Foothill;
and (i)
subject to the provisions of the Intercreditor Agreement, liens
and security
interests in favor of Old Lenders' Agent.
"Permitted Protest" means the right of Borrower or a
Subsidiary
of Borrower to protest any lien, tax, rental payment, or other
charge, other
than any such lien or charge that secures the Obligations, pro
vided (i) a
reserve with respect to such obligation is established on the
books of
Borrower or its Subsidiary in an amount that is reasonably
satisfactory to
Foothill, (ii) any such protest is instituted and diligently
prosecuted by
Borrower or its Subsidiary in good faith, and (iii) Foothill is
satisfied
that, while any such protest is pending, there will be no
impairment of the
enforceability, validity, or priority of any of the liens or security
interests of Foothill in and to the property or assets of Borrower
or any
Subsidiary of Borrower.
"Permitted Real Property Dispositions" means (a) the
sale of the
Tinton Falls Real Property so long as at the time thereof (i) no
Event of
Default has occurred and is continuing, and (ii) the net cash
proceeds of
such sale equals or exceeds Two Million Five Hundred Thousand
Dollars
($2,500,000), and (b) the sale of the Oceanport Real Property so
long as at
the time thereof (i) no Event of Default has occurred and is
continuing, and
(ii) the net cash proceeds of such sale equals or exceeds Ten
Million
Dollars ($10,000,000).
"Person" means and includes natural persons,
corporations,
limited partnerships, general partnerships, joint ventures,
trusts, land
trusts, business trusts, or other organizations, irrespective of
whether
they are legal entities, and governments and agencies and
political
subdivisions thereof.
"Plan" means an employee benefit plan (as defined in
Section
3(3) of ERISA) which Borrower or any ERISA Affiliate sponsors or
maintains
or to which Borrower or any ERISA Affiliate makes, is making, or
is
obligated to make contributions, including any Multiemployer Plan
or
Qualified Plan.
"Prohibited Transaction" means any transaction
described in
Section 406 of ERISA which is not exempt by reason of Section 408
of ERISA,
and any transaction described in Section 4975(c) or (d) of the IRC
which is
not exempt by reason of Section 4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in
Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a)
of the IRC
which Borrower or any ERISA Affiliate sponsors, maintains, or to
which any
such person makes, is making, or is obligated to make,
contributions, or, in
the case of a multiple-employer plan (as described in Section
4064(a) of
ERISA), has made contributions at any time during the immediately
preceding
period covering at least five (5) plan years, but excluding any
Multiemployer Plan.
"Qualified Transaction" means a sale of all or
substantially all
of the assets of Borrower, a merger wherein Borrower is not the
surviving
entity, or a sale of all or substantially all of the issued and
outstanding
capital stock of Borrower.
"Real Property" means the parcel or parcels of real
property and
the related improvements thereto identified on Schedule R-1, and
any estates
or interests in real property hereafter acquired by Borrower.
"Reference Rate" means the highest of the variable
rates of
interest, per annum, most recently announced by (a) Bank of
America, N.T. &
S.A., (b) Mellon Bank, N.A., and (c) Citibank, N.A., or any
successor to any
of the foregoing institutions, as its "prime rate" or "reference
rate," as
the case may be, irrespective of whether such announced rate is the best
rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section
3.4.
"Reportable Event" means any event described in
Section 4043
(other than Subsections (b)(7) and (b)(9)) of ERISA.
"Service Contract" means a contract relative to
Borrower's
provision of maintenance (full maintenance, software only, or
hardware
only), consulting (professional advice, skill enhancement, or
training), or
repair services.
"Solvent" means, with respect to any Person on a
particular
date, that on such date (a) at fair valuations, all of the
properties and
assets of such Person are greater than the sum of the debts,
including
contingent liabilities, of such Person, (b) the present fair
salable value
of the properties and assets of such Person is not less than the
amount that
will be required to pay the probable liability of such Person on
its debts
as they become absolute and matured, (c) such Person is able to
realize upon
its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal
course of business, (d) such Person does not intend to, and does
not believe
that it will, incur debts beyond such Person's ability to pay as
such debts
mature, and (e) such Person is not engaged in business or a
transaction, and
is not about to engage in business or a transaction, for which
such Person's
properties and assets would constitute unreasonably small capital
after
giving due consideration to the prevailing practices in the
industry in
which such Person is engaged. In computing the amount of
contingent
liabilities at any time, it is intended that such liabilities will
be
computed at the amount that, in light of all the facts and
circumstances
existing at such time, represents the amount that reasonably can
be expected
to become an actual or matured liability.
"Source Code Escrow Agreement" means a Source Code
Escrow
Agreement among Borrower, Foothill and a third party escrowholder,
in form
and substance satisfactory to Foothill.
"Stock Pledge Agreement" means that certain Stock
Pledge
Agreement, dated as of June 29, 1995, between Borrower and
Foothill, which
agreement shall be substantially in the form of Exhibit S-1
attached hereto.
"Subsidiary" means any corporation, association,
partnership,
joint venture, or other business entity of which a Person,
directly or
indirectly, either (i) with respect to a corporation, owns or
controls 50%
or more of the voting rights attached to all outstanding
securities thereof
and has the ability to elect at least a majority of the board of
directors
or similar managing body, irrespective of whether a class or
classes shall
or might have voting power by reason of the happening of any
contingency, or
(ii) with respect to an association, partnership, joint venture or
other
business entity, is entitled to share in 50% or more of the profits and
losses, however determined, and has voting control with respect thereto.
The foregoing to the contrary notwithstanding, neither the Inactive
Subsidiaries nor Concurrent Nippon shall be "Subsidiaries" for purposes of
this Agreement or the other Loan Documents, other than for purposes of
financial reporting covenants and financial performance covenants.
"Tangible Net Worth" means, as of the date any determination
thereof is to be made, the difference of: (a) Borrower's total
stockholder's equity; prior to the effect of cumulative translation
adjustments, minus (b) the sum of: (i) all intangible assets of Borrower
(including capitalized software costs and deferred financing
fees); (ii) all
of Borrower's prepaid expenses; and (iii) all amounts due to
Borrower from
Affiliates, calculated on a consolidated basis in accordance with
GAAP.
"Term Note" has the meaning set forth in Section 2.2
hereof.
"Tinton Falls Real Property" means Borrower's Real
Property
located in Tinton Falls, New Jersey.
"Trademark Security Agreement" means a security
agreement, dated
as of June 29, 1995, between Borrower and Foothill, which
agreement shall be
substantially in the form of Exhibit T-1 attached hereto.
"Unfunded Benefit Liability" means the excess of a
Plan's
benefit liabilities (as defined in Section 4001(a)(16) of ERISA)
over the
current value of such Plan's assets, determined in accordance with
the
assumptions used by the Plan's actuaries for funding the Plan
pursuant to
Section 412 of the IRC for the applicable plan year.
"Voidable Transfer" has the meaning set forth in
Section 15.8.
"Working Capital" means the result of subtracting
Consolidated
Current Liabilities from Consolidated Current Assets.
1.2 Accounting Terms. All accounting terms not
specifically
defined herein shall be construed in accordance with GAAP. When
used
herein, the term "financial statements" shall include the notes
and
schedules thereto. Whenever the term "Borrower" is used in
respect of a
financial covenant or a related definition, it shall be understood
to mean
Borrower on a consolidated basis unless the context clearly
requires
otherwise. If any changes in accounting principles from those
used in the
preparation of the financial statements referred to in this
Agreement are
hereafter occasioned by the promulgation of rules, regulations,
pronouncements, or opinions of, or required by, the Financial
Accounting Standards Board or the American Institute of Certified
Public
Accountants (or successors thereto or agencies with similar
functions), or
there shall occur any change in Borrower's fiscal periods
permitted
hereunder and, as a result of any such changes, there shall result
a change
in the method of calculating any of the financial covenants,
negative
covenants, standards, or other terms or conditions found in this
Agreement,
then the parties hereto agree to enter into negotiations in order
to amend
such provisions and the definition of "GAAP" set forth in Section
1.1 so as
to equitably reflect such changes with the desired result that the
criteria
for evaluating the financial condition of Borrower and its
Subsidiaries
shall be the same after such changes as if such changes had not
been made.
1.3 Code. Any terms used in this Agreement that are
defined
in the Code shall be construed and defined as set forth in the
Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this
Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term
"including" is not
limiting, and the term "or" has, except where otherwise indicated,
the
inclusive meaning represented by the phrase "and/or." The words
"hereof,"
"herein," "hereby," "hereunder," and similar terms in this
Agreement refer
to this Agreement as a whole and not to any particular provision
of this
Agreement. Section, subsection, clause, schedule, and exhibit
references
are to this Agreement unless otherwise specified. Any reference
in this
Agreement or in the Loan Documents to this Agreement or any of the
Loan
Documents shall include all alterations, amendments, changes,
extensions,
modifications, renewals, replacements, substitutions, and
supplements,
thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules
and exhibits
attached to this Agreement shall be deemed incorporated herein by
reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances. (a) Subject to the terms
and
conditions of this Agreement, Foothill agrees to make revolving
advances to
Borrower in an amount at any one time outstanding not to exceed
the
Borrowing Base hereunder. For purposes of this Agreement,
"Borrowing Base",
as of any date of determination, shall mean the sum of: (i) an
amount equal
to the lesser of: (x) Eight Million Dollars ($8,000,000), (y)(1)
eighty
percent (80%) of the amount of Eligible Accounts, less (2) the
amount of the
Dilution Reserve, and (z) an amount equal to seventy-five percent
(75%) of
Borrower's domestic cash collections with respect to Accounts for
the
immediately preceding ninety (90) day period; plus (ii) an amount
equal to
the lesser of: (y) One Million Dollars ($1,000,000), and (z)
eighty percent
(80%) of Eligible Unearned Service Accounts; plus (iii) an amount
equal to
the lowest of: (x)(1) the value of Eligible Raw Materials
Inventory plus the
value of Eligible Spare Parts Inventory less the amount of the
Inventory
Reserve, times (2) twenty five percent (25%), (y) one hundred
thirty-three
percent (133%) of the amount of credit availability created by
clauses (i)
and (ii) above, and (z) Two Million Dollars ($2,000,000), less an
amount
equal to (1) Fifty Thousand Dollars ($50,000) times (2) the number
of months since the Closing Date.
(b) Anything to the contrary in Section 2.1(a)
above
notwithstanding, Foothill may reduce its advance rates based upon
Eligible
Accounts or Eligible Inventory without declaring an Event of
Default if it
determines, in its reasonable discretion, that there is a material
impairment of the prospect of repayment of all or any portion of
the
Obligations or a material impairment of the value or priority of
Foothill's
security interests in the Collateral.
(c) Foothill shall have no obligation to make
advances
hereunder to the extent they would cause (i) the outstanding
Obligations
(other than the Obligations evidenced by the Term Note) to exceed
the
Maximum Revolver Amount, or (ii) the outstanding Obligations to
exceed the
Maximum Amount.
(d) Foothill is authorized to make advances
under this
Agreement based upon telephonic or other instructions received
from anyone
purporting to be an Authorized Officer of Borrower, or without
instructions
if pursuant to Section 2.4(d). Borrower agrees to establish and
maintain a
single designated deposit account for the purpose of receiving the
proceeds
of the advances requested by Borrower and made by Foothill
hereunder.
Unless otherwise agreed by Foothill and Borrower, any advance
requested by
Borrower and made by Foothill hereunder shall be made to such
designated
deposit account. Amounts borrowed pursuant to this Section 2.1
may be
repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.
2.2 Term Loan. (a) Foothill has agreed to make a
term loan
to Borrower in the original principal amount of Ten Million
Dollars
($10,000,000), to be evidenced by and repayable in accordance with
the terms
and conditions of a promissory note (the "Term Note"), of even
date
herewith, executed by Borrower in favor of Foothill. The term
loan shall be
repaid in thirty-seven (37) installments of principal
in the following amounts:
Month Installment Amount
1 through 36 $139,000
37 Balance
Each such installment shall be due and payable on the first day of
each
month commencing on the first day of August, 1995 and continuing
until and
including the date on which the unpaid balance of the Term Loan is
paid in
full. The outstanding principal balance and all accrued and
unpaid interest
under the Term Loan shall be due and payable upon the termination
of this
Agreement, whether by its terms, by prepayment, by acceleration,
or
otherwise. All amounts evidenced by the Term Note shall
constitute
Obligations.
2.3 Overadvances.
(a) If, at any time or for any reason, the
amount of
Obligations owed by Borrower to Foothill pursuant to Sections 2.1
is greater
than either the dollar or percentage limitations set forth in
Sections 2.1
(an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the
amount of such excess to be used by Foothill first, to repay non-
contingent
Obligations.
(b) In the event that the ratio of total
Obligations to
Annualized Service Revenues contained in Section 6.12(e) exceeds
0.35:1,
Borrower shall prepay to Foothill the amount of such excess to be
applied by
Foothill first to obligations under Section 2.1 and then to the
installments
due under the Term Note in the inverse order of their maturity.
2.4 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations shall bear
interest
at a per annum rate of two (2.0) percentage points above the
Reference Rate.
(b) Default Rate. All Obligations shall bear
interest,
from and after the occurrence and during the continuance of an
Event of
Default, at a per annum rate equal to five (5.0) percentage points
above the
Reference Rate.
(c) Minimum Interest. In no event shall the
rate of
interest chargeable hereunder be less than seven percent (7%) per
annum. To
the extent that interest accrued hereunder at the rate set forth
herein
would be less than the foregoing minimum rate, the interest rate
chargeable
hereunder for the period in question automatically shall be deemed
increased
to the minimum rate.
(d) Payments. Interest hereunder shall be due
and
payable, in arrears, on the first day of each month during the
term hereof.
Borrower hereby authorizes Foothill, at its option, without prior
notice to
Borrower, to charge such interest, all Foothill Expenses (as and
when
incurred), and all installments or other payments due under the Term Note or
any other note or other Loan Document to Borrower's loan account
with
respect to the revolving loan facility provided under Section 2.1,
which
amounts thereafter shall accrue interest at the rate then
applicable
hereunder. Any interest not paid when due shall be compounded by
becoming a
part of the Obligations, and such interest shall thereafter accrue
interest
at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of the
date of
this Agreement is nine percent (9%) per annum. In the event the
Reference
Rate is changed from time to time hereafter, the applicable rate
of interest
hereunder automatically and immediately shall be increased or
decreased by
an amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis
of a
three hundred sixty (360) day year for the actual number of days
elapsed.
(f) Intent to Limit Charges to Maximum Lawful
Rate. In
no event shall the interest rate or rates payable under this
Agreement or
the Term Note, plus any other amounts paid in connection herewith,
exceed the highest rate permissible under any law that a court of
competent
jurisdiction shall, in a final determination, deem applicable.
Borrower and
Foothill, in executing this Agreement and the Term Note, intend
legally to
agree upon the rate or rates of interest and manner of payment
stated within
it; provided, however, that, anything contained herein or in the
Term Note
to the contrary notwithstanding, if said rate or rates of interest
or manner
of payment exceeds the maximum allowable under applicable law,
then, ipso
facto as of the date of this Agreement and the Term Note, Borrower
is and
shall be liable only for the payment of such maximum as allowed by
law, and
payment received from Borrower in excess of such legal maximum,
whenever
received, shall be applied to reduce the principal balance of the
Obligations to the extent of such excess.
2.5 Crediting Payments; Application of Collections.
The
receipt of any wire transfer of funds, check, or other item of
payment by
Foothill (whether from transfers to Foothill by the Lockbox Banks
pursuant
to the Lockbox Agreements or otherwise) immediately shall be
applied to
provisionally reduce the Obligations, but shall not be considered
a payment
on account unless such wire transfer is of immediately available
federal
funds and is made to the appropriate deposit account of Foothill
or unless
and until such check or other item of payment is honored when
presented for
payment. From and after the Closing Date, Foothill shall be
entitled to
charge Borrower for two (2) Business Days of `clearance' at the
rate set
forth in Section 2.4(a) or Section 2.4(b), as applicable, on all
collections, checks, wire transfers, or other items of payment that are
received by Foothill (regardless of whether forwarded by the
Lockbox Banks
to Foothill, whether provisionally applied to reduce the
Obligations, or
otherwise). This across-the-board two (2) Business Day clearance
charge on
all receipts is acknowledged by the parties to constitute an
integral aspect
of the pricing of Foothill's facility to Borrower, and shall apply
irrespective of the characterization of whether receipts are owned
by
Borrower or Foothill, and irrespective of the level of Borrower's
Obligations to Foothill. Should any check or item of payment not
be honored
when presented for payment, then Borrower shall be deemed not to have made
such payment, and interest shall be recalculated accordingly.
Anything to
the contrary contained herein notwithstanding, any wire transfer,
check, or
other item of payment shall be deemed received by Foothill only if
it is
received into Foothill's Operating Account (as such account is
identified in
the Lockbox Agreements) on or before 11:00 a.m. Los Angeles time.
If any
wire transfer, check, or other item of payment is received into
Foothill's
Operating Account (as such account is identified in the Lockbox
Agreements)
after 11:00 a.m. Los Angeles time it shall be deemed to have been
received
by Foothill as of the opening of business on the immediately
following
Business Day.
2.6 Statements of Obligations. Foothill shall
render
statements to Borrower of the Obligations, including principal,
interest,
fees, and including an itemization of all charges and expenses
constituting
Foothill Expenses owing, and such statements shall be conclusively
presumed
to be correct and accurate and constitute an account stated
between Borrower
and Foothill unless, within thirty (30) days after receipt thereof
by
Borrower, Borrower shall deliver to Foothill by registered or
certified mail
at its address specified in Section 12, written objection thereto
describing
the error or errors contained in any such statements.
2.7 Fees. Borrower shall pay to Foothill the
following fees:
(a) Closing Fee. A one time closing fee of
Ninety
Thousand Dollars ($90,000) which is earned, in full, on the
Closing Date and
is due and payable by Borrower to Foothill in connection with this
Agreement
on the Closing Date;
(b) Unused Line Fee. On the first day of each
month
during the term of this Agreement, a fee in an amount equal to
one-quarter
of one percent (.25%) per annum times the Average Unused Portion
of the
Maximum Revolver Amount;
(c) Annual Facility Fee. On each anniversary
of the
Closing Date, a fee in an amount equal to one-quarter of one
percent (.25%)
of the sum of: (i) the Maximum Revolver Amount; plus (ii) the then
outstanding principal balance of the Term Note; such fee to be
fully earned
and non-refundable on each such anniversary;
(d) Financial Examination, Documentation, and
Appraisal
Fees. Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day
per examiner, plus reasonable, documented, out-of-pocket expenses
for each
financial analysis and examination (i.e., audits) of Borrower
performed by Foothill or its agents; Foothill's customary
appraisal fee of One Thousand
Five Hundred Dollars ($1,500) per day per appraiser, plus
reasonable,
documented, out-of-pocket expenses for each appraisal of the
Collateral
performed by Foothill or its agents; provided, that, without
limiting the
number of audits or appraisals that Foothill may perform, prior to
the
occurrence of an Event of Default, Foothill shall not be entitled
to
reimbursement for any such costs and fees incurred in connection
with audits
in excess of four (4) per year or appraisals in excess of two (2)
per year;
and
(e) Servicing Fee. On the first day of each
month
during the term of this Agreement commencing with August 1, 1995,
and
thereafter so long as any Obligations are outstanding, a servicing
fee in an
amount equal to Ten Thousand Dollars ($10,000) per month.
2.8 Mandatory Prepayment Requirement. Concurrent
with the
Permitted Real Property Disposition of the Tinton Falls Real
Property and as
a condition concurrent to the release of Foothill's lien upon the
Tinton
Falls Real Property, Borrower shall prepay the Term Note by
seventy-five
percent (75%) of the net cash proceeds of such Permitted Real
Property
Disposition, such repayment to be applied as follows: (a) fifty
percent
(50%) thereof, up to a maximum of One Million Dollars
($1,000,000), to the
installments due under the Term Note in the order of their
maturity, and (b)
the balance thereof, to the installments due under the Term Note
in the
inverse order of their maturity. Concurrent with the Permitted Real
Property Disposition of the Oceanport Real Property and as a
condition
concurrent to the release of Foothill's lien upon the Oceanport
Real
Property, Borrower shall prepay the Term Note by seventy-five
percent (75%)
of the net cash proceeds of such Permitted Real Property
Disposition, such
repayment to be applied to the installments due under the Term
Note in the
inverse order of their maturity.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance. The
obligation
of Foothill to make the initial advance is subject to the
fulfillment, to
the satisfaction of Foothill and its counsel, of each of the
following
conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before
July 15,
1995;
(b) Old Lender shall have executed and
delivered the
Paydown Letter;
(c) Foothill shall have received confirmation
of the
filing of its financing statements against Borrower in the State
of New
Jersey and the Commonwealth of Massachusetts;
(d) Foothill shall have received each of the
following
documents, duly executed, and each such document shall be in full
force and
effect:
i) the Lockbox Agreements;
ii) the Term Note;
iii) the Mortgages;
iv) the Intercreditor Agreement;
v) the Environmental Indemnity;
vii) the Stock Pledge Agreement;
viii) the Copyright Security Agreement;
viii) the Patent Security Agreement;
ix) the Trademark Security Agreement; and
x) the Acknowledgement Agreement;
(e) Foothill shall have received a certificate
from the
Secretary of Borrower attesting to the resolutions of Borrower's
Board of
Directors authorizing its execution, delivery, and performance of
this
Agreement and the other Loan Documents to which Borrower is a
party and
authorizing specific officers of Borrower to execute same;
(f) Foothill shall have received copies of
Borrower's
By-laws and Articles or Certificate of Incorporation, as amended,
modified,
or supplemented to the Closing Date, certified by the Secretary of
Borrower;
(g) Foothill shall have received a certificate
of
corporate status with respect to Borrower, dated within ten (10)
days of the
Closing Date, by the appropriate officer of the jurisdiction of
incorporation of Borrower, which certificate shall indicate that
Borrower is
in good standing in such jurisdiction;
(h) Foothill shall have received a certificate
of
corporate status with respect to Borrower, dated within fifteen
(15) days of
the Closing Date, such certificate to be issued by the appropriate
officer
of the State of New Jersey and the Commonwealth of Massachusetts,
which
certificates shall indicate that Borrower is in good standing in
each such
jurisdiction;
(i) Foothill shall have received original
certificates
evidencing all of the issued and outstanding stock interests
pledged
pursuant to the Stock Pledge Agreement, together with stock powers
with
respect to such certificates duly executed in blank by Borrower.
(j) Foothill shall have received the certified
copies of
the policies of insurance, together with the endorsements thereto,
as are
required by Section 6.11 hereof, the form and substance of which
shall be
satisfactory to Foothill and its counsel;
(k) Foothill shall have received a
certificate, duly
executed by an Authorized Officer and dated as of the Closing
Date, that
identifies the Inactive Subsidiaries and contains information
concerning the
de minimis value of their assets;
(l) Foothill shall have received ALTA Lender's
Policies
of Title Insurance, or a commitment therefor, from a title company
reasonably satisfactory to Foothill, in an amount equal to not
less than
$6,000,000, insuring its first priority lien upon each fee parcel
composing
the Real Property, such policies to contain such endorsements as
may be
required by Foothill and only those exceptions acceptable to
Foothill, and
otherwise to be in form satisfactory to Foothill;
(m) Foothill shall have received the results
of
environmental site assessments for each parcel of Real Property
the results
of which shall be acceptable to Foothill in all respects. The
environmental
consultants retained for the environmental reports, the scope of
the
reports, and results of the reports would need to be acceptable to
Foothill
and its counsel, in their sole discretion;
(n) Foothill shall have received an opinion of
Borrower's counsel in form and substance satisfactory to Foothill
in its
sole discretion;
(o) Foothill shall have received satisfactory
evidence
that all returns required to be filed by Borrower have been timely
filed and
all taxes upon Borrower or its properties, assets, income and
franchises
(including Real Property taxes and payroll taxes) have been paid
prior to
delinquency, except such taxes that are the subject of a Permitted
Protest;
(p) Foothill shall have received satisfactory
evidence
that the expiry date of the Letters of Credit is being extended to
on or
after the Renewal Date;
(q) Completion of customer referral checks,
the results
of which are acceptable to Foothill;
(r) Foothill shall have received evidence
satisfactory
to it as to the execution and delivery of the Credit Agreement;
and
(s) all other documents and legal matters in
connection
with the transactions contemplated by this Agreement shall have
been
delivered or executed or recorded and shall be in form and
substance
satisfactory to Foothill and its counsel.
3.2 Conditions Precedent to All Advances. The
following shall
be conditions precedent to all advances hereunder:
(a) the representations and warranties
contained in this
Agreement and the other Loan Documents shall be true and correct
in all
respects on and as of the date of such advance, as though made on
and as of
such date (except to the extent that such representations and
warranties
relate solely to an earlier date);
(b) no Event of Default or event which with
the giving
of notice or passage of time would constitute an Event of Default
shall have
occurred and be continuing on the date of such advance, nor shall
either
result from the making thereof; and
(c) no injunction, writ, restraining order, or
other
order of any nature prohibiting, directly or indirectly, the
making of such
advance shall have been issued and remain in force by any governmental
authority against Borrower, Foothill, or any of their Affiliates.
3.3 Conditions Subsequent. As conditions subsequent
to the
making of the initial advance, the failure by Borrower to fulfill
each of
which shall constitute an Event of Default:
(a) Borrower shall use reasonable efforts to provide
Foothill
with a landlord waiver, in form and substance satisfactory to
Foothill in
its sole discretion, from the lessor in respect of Borrower's
location in
Westford, Massachusetts; and
(b) Borrower shall enter into a Source Code
Agreement within
forty five (45) days of the Closing Date.
3.4 Term; Automatic Renewal. This Agreement shall
become
effective upon the execution and delivery hereof by Borrower and
Foothill
and shall continue in full force and effect for a term ending on
August 1,
1998 (the "Renewal Date") and automatically shall be renewed for
successive
one (1) year periods thereafter, unless sooner terminated pursuant
to the
terms hereof. Either party may terminate this Agreement effective
on the
Renewal Date or on any one (1) year anniversary of the Renewal
Date by
giving the other party at least ninety (90) days prior written
notice by
registered or certified mail, return receipt requested. The
foregoing
notwithstanding, Foothill shall have the right to terminate its
obligations
under this Agreement immediately and without notice upon the
occurrence and
during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of
termination of this
Agreement, all Obligations immediately shall become due and
payable without
notice or demand. No termination of this Agreement, however,
shall relieve
or discharge Borrower of Borrower's duties, Obligations, or
covenants
hereunder, and Foothill's continuing security interests in the
Collateral
and the Real Property shall remain in effect until all Obligations
have been
fully and finally discharged and Foothill's obligation to provide
advances
hereunder is terminated. If Borrower has sent a notice of
termination
pursuant to the provisions of Section 3.4, but fails to pay all
Obligations
on the date set forth in said notice, then Foothill may, but shall
not be
required to, renew this Agreement for an additional term of one
(1) year.
3.6 Early Termination by Borrower. The provisions
of Section
3.4 that allow termination of this Agreement by Borrower only on
the Renewal
Date and certain anniversaries thereof notwithstanding, Borrower
has the
option, at any time upon ninety (90) days prior written notice to
Foothill,
to terminate this Agreement by paying to Foothill, in cash, the
Obligations,
together with a premium (the "Early Termination Premium") equal to
(a) the
Maximum Revolver Amount, plus the then outstanding principal
balance of the
Term Note as of the date of termination, times (b)(i) three
percent (3%), if
during the first year following the Closing Date, (ii) one and
one-half
percent (1.5%), if during the second year following the Closing
Date, (iii)
three-quarters of one percent (.75%), if during the third year
following the
Closing Date, and (iv) zero, if thereafter. The foregoing
notwithstanding,
in the event Borrower terminates this Agreement in connection with
the
consummation of a Qualified Transaction, the Early Termination
Premium
payable shall be equal to one-half (1/2) of the applicable amount
otherwise
payable. At times other than in connection with the termination
of this
Agreement, Borrower shall have the right to prepay the Term Note,
in whole
or in part, upon ten (10) days prior written notice to Foothill,
without
penalty or premium, such prepayments to be applied to installments
due under
the Term Note in the inverse order of their maturity.
3.7 Termination Upon Event of Default. If Foothill
terminates
this Agreement upon the occurrence of an Event of Default that
intentionally
is caused by Borrower for the purpose, in Foothill's reasonable
judgment, of
avoiding payment of the Early Termination Premium provided in
Section 3.6,
in view of the impracticability and extreme difficulty of
ascertaining
actual damages and by mutual agreement of the parties as to a
reasonable
calculation of Foothill's lost profits as a result thereof,
Borrower shall
pay to Foothill upon the effective date of such termination, a
premium in an
amount equal to the Early Termination Premium. The Early
Termination
Premium shall be presumed to be the amount of damages sustained by
Foothill
as the result of the early termination and Borrower agrees that it
is
reasonable under the circumstances currently existing. The Early
Termination Premium provided for in this Section 3.7 shall be
deemed
included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby
grants to
Foothill a continuing security interest in all currently existing
and
hereafter acquired or arising Collateral in order to secure prompt
repayment
of any and all Obligations and in order to secure prompt
performance by
Borrower of each of its covenants and duties under the Loan
Documents.
Foothill's security interests in the Collateral shall attach to
all
Collateral without further act on the part of Foothill or
Borrower.
Anything contained in this Agreement or any other Loan Document to
the
contrary notwithstanding, except for the sale of Inventory to
buyers in the
ordinary course of business or, subject to compliance with Section
2.8
hereof, the Permitted Real Property Dispositions, Borrower has no
authority,
express or implied, to dispose of any item or portion of the
Collateral or
the Real Property.
4.2 Negotiable Collateral. In the event that any
Collateral,
including proceeds, is evidenced by or consists of Negotiable
Collateral,
Borrower shall, immediately upon the request of Foothill, endorse
and assign
such Negotiable Collateral to Foothill and deliver physical
possession of
such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles,
Negotiable
Collateral. On or before the Closing Date, Foothill, Borrower,
and the Lockbox Banks shall enter into the Lockbox Agreements, in
form and
substance satisfactory to Foothill in its sole discretion,
pursuant to which
all of Borrower's cash receipts, checks, and other items of
payment
(including, insurance proceeds, proceeds of cash sales, rental
proceeds, and
tax refunds) that are received by the Lockbox Banks are to be
forwarded by
the Lockbox Banks to Foothill on a daily basis. At any time that
an Event
of Default has occurred and is continuing or Foothill deems itself
insecure
(in accordance with Section 1208 of the Code), Foothill or Foothill's
designee may: (a) notify customers or Account Debtors of Borrower that the
Accounts, General Intangibles, or Negotiable Collateral have been assigned
to Foothill or that Foothill has a security interest therein; and
(b)
collect the Accounts, General Intangibles, and Negotiable
Collateral
directly and charge the collection costs and expenses to
Borrower's loan
account. Borrower agrees that it will hold in trust for Foothill,
as
Foothill's trustee, any cash receipts, checks, and other items of
payment
(including, insurance proceeds, proceeds of cash sales, rental
proceeds, and
tax refunds) that it receives and immediately will deliver said
cash
receipts, checks, and other items of payment to Foothill in their
original
form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any
time upon the request of Foothill, Borrower shall execute and
deliver to
Foothill all financing statements, continuation financing
statements,
fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications
for title,
affidavits, reports, notices, schedules of accounts, letters of
authority,
and all other documents that Foothill may reasonably request, in
form
satisfactory to Foothill, to perfect and continue perfected
Foothill's
security interests in the Collateral and the Real Property, and in
order to
fully consummate all of the transactions contemplated hereby and
under the
other Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably
makes,
constitutes, and appoints Foothill (and any of Foothill's
officers,
employees, or agents designated by Foothill) as Borrower's true
and lawful
attorney, with power to: (a) if Borrower refuses to, or fails
timely to
execute and deliver any of the documents described in Section 4.4,
sign the
name of Borrower on any of the documents described in Section 4.4;
(b) at
any time that an Event of Default has occurred and is continuing
or Foothill
deems itself insecure (in accordance with Section 1208 of the
Code), sign
Borrower's name on any invoice or bill of lading relating to any
Account,
drafts against Account Debtors, schedules and assignments of
Accounts,
verifications of Accounts, and notices to Account Debtors; (c)
send requests
for verification of Accounts; (d) endorse Borrower's name on any
checks,
notices, acceptances, money orders, drafts, or other item of payment or
security that may come into Foothill's possession; (e) at any time that an
Event of Default has occurred and is continuing or Foothill deems
itself
insecure (in accordance with Section 1208 of the Code), notify the
post
office authorities to change the address for delivery of
Borrower's mail to
an address designated by Foothill, to receive and open all mail
addressed to
Borrower, and to retain all mail relating to the Collateral and
forward all
other mail to Borrower; (f) at any time that an Event of Default
has
occurred and is continuing or Foothill deems itself insecure (in
accordance
with Section 1208 of the Code), make, settle, and adjust all
claims under
Borrower's policies of insurance and make all determinations and
decisions
with respect to such policies of insurance; and (g) at any time
that an
Event of Default has occurred and is continuing or Foothill deems
itself
insecure (in accordance with Section 1208 of the Code), settle and
adjust
disputes and claims respecting the Accounts directly with Account
Debtors,
for amounts and upon terms which Foothill determines to be
reasonable, and
Foothill may cause to be executed and delivered any documents and
releases
which Foothill determines to be necessary. The appointment of
Foothill as
Borrower's attorney, and each and every one of Foothill's rights
and powers,
being coupled with an interest, is irrevocable until all of the
Obligations
have been fully and finally repaid and performed and Foothill's
obligation
to extend credit hereunder is terminated.
4.6 Right to Inspect. Foothill (through any of its
officers,
employees, or agents) shall have the right, from time to time
hereafter to
inspect Borrower's Books and to check, test, and appraise the
Collateral or
the Real Property in order to verify Borrower's financial
condition or the
amount, quality, value, condition of, or any other matter relating
to, the
Collateral or the Real Property.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as
follows:
5.1 No Prior Encumbrances. Borrower has good and
indefeasible
title to the Collateral and the Real Property, free and clear of
liens,
claims, security interests, or encumbrances, except for Permitted
Liens.
5.2 Eligible Accounts The Eligible Accounts are, at
the time
of the creation thereof and as of each date on which Borrower
includes them
in a Borrowing Base calculation or certification, bona fide
existing
obligations created by the sale or license and delivery of
Inventory or
software or the rendition of services to Account Debtors in the
ordinary
course of Borrower's business, unconditionally owed to Borrower
without
defenses, disputes, offsets, counterclaims, or rights of return or
cancellation; provided, however, that in the case of Eligible
Unearned
Service Accounts the right to payment therefor has not yet
accrued. The
property giving rise to such Eligible Accounts has been delivered
to the
Account Debtor, or to the Account Debtor's agent for immediate
shipment to
and unconditional acceptance by the Account Debtor. At the time
of the
creation of an Eligible Account and as of each date on which
Borrower
includes an Eligible Account in a Borrowing Base calculation or
certification, Borrower has not received notice of actual or
imminent
bankruptcy, insolvency, or material impairment of the financial
condition of
any applicable Account Debtor regarding such Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is
now and at
all times hereafter shall be of good and merchantable quality,
free from
defects.
5.4 Location of Inventory and Equipment. The
Inventory and
Equipment are not stored with a bailee, warehouseman, or similar
party
(without Foothill's prior written consent) and are located only at
the
locations identified on Schedule 6.14 or otherwise permitted by
Section
6.14.
5.5 Inventory Records. Borrower now keeps, and
hereafter at
all times shall keep, correct and accurate records itemizing and
describing
the kind, type, quality, and quantity of the Inventory, and
Borrower's cost
therefor.
5.6 Location of Chief Executive Office; FEIN. The
chief
executive office of Borrower is located at the address indicated
in the
preamble to this Agreement and Borrower's FEIN is 04-2735766.
5.7 Due Organization and Qualification; Subsidiaries.
(a) Borrower and each Subsidiary is a
corporation duly
organized and existing and in good standing under the laws of the
jurisdiction of its incorporation and qualified and licensed to do
business
in, and in good standing in, any state where the failure to be so
licensed
or qualified could reasonably be expected to have a material
adverse effect
on the business, operations, condition (financial or otherwise),
finances,
or prospects of Borrower and its Subsidiaries, taken as a whole,
or on the
value of the Collateral or the Real Property to Foothill.
(b) Set forth on Schedule 5.7 is a complete
and accurate
list of Borrower's corporate Subsidiaries, showing: (i) the
jurisdiction of
their incorporation; and (ii) the number of outstanding and the
percentage
of outstanding shares of each such class owned (directly or
indirectly) by
Borrower or one or more of its Subsidiaries. All of the
outstanding capital
stock of each Subsidiary, none of which stock is classified as
preferred
stock, has been validly issued and is fully paid and non-
assessable.
(c) Except as set forth in Schedule 5.7, no
capital
stock (or any securities, instruments, warrants, options, purchase
rights,
conversion or exchange rights, calls, commitments or claims of any
character
convertible into or exercisable for capital stock) of any
Subsidiary is
subject to issuance under any security, instrument, warrant,
option,
purchase right, conversion or exchange right, call, commitment or
claim of
any right, title or interest therein or thereto.
5.8 Due Authorization; No Conflict. The execution,
delivery,
and performance of the Loan Documents to which they are a party
are within
Borrower's and its Subsidiaries' respective corporate powers, have
been duly
authorized, and are not in conflict with nor constitute a breach
of any
provision contained in Borrower's or its Subsidiaries' respective
Articles
or Certificate of Incorporation, or By-laws, nor will they
constitute an
event of default under any material agreement to which Borrower or
any
Subsidiary of Borrower is a party or by which its properties or
assets may
be bound.
5.9 Litigation. There are no actions or proceedings
pending
by or against Borrower or its Subsidiaries before any court or
administrative agency and Borrower does not have knowledge or
belief of any
pending, threatened, or imminent litigation, governmental
investigations, or
claims, complaints, actions, or prosecutions involving Borrower or
its
Subsidiaries or any guarantor of the Obligations, except for: (a)
ongoing
collection matters in which Borrower or its Subsidiaries are the
plaintiffs;
(b) matters disclosed on Schedule 5.9; and (c) matters arising
after the
date hereof that, if decided adversely to Borrower or its
Subsidiaries,
would not materially impair the prospect of repayment of the
Obligations or
materially impair the value or priority of Foothill's security
interests in
the Collateral or the Real Property.
5.10 No Material Adverse Change in Financial Condition. All
financial statements relating to Borrower or any guarantor of the
Obligations that have been delivered by Borrower to Foothill have
been
prepared in accordance with GAAP and fairly present Borrower's (or
such
guarantor's, as applicable) financial condition as of the date
thereof and
Borrower's results of operations for the period then ended. There
has not
been a material adverse change in the financial condition of
Borrower (or
such guarantor, as applicable) since the March 31, 1995 financial
statements
submitted to Foothill on or before the Closing Date.
5.11 Solvency. Borrower is Solvent, and each
Subsidiary of
Borrower is Solvent. No transfer of property is being made by
Borrower or
any Subsidiary of Borrower and no obligation is being incurred by
Borrower
or any Subsidiary of Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with
the intent
to hinder, delay, or defraud either present or future creditors of
Borrower
or any Subsidiary of Borrower.
5.12 Employee Benefits. Each Plan is in compliance
in all
material respects with the applicable provisions of ERISA and the
IRC. Each
Qualified Plan and Multiemployer Plan has been determined by the
Internal
Revenue Service to qualify under Section 401 of the IRC, and the
trusts
created thereunder have been determined to be exempt from tax
under Section
501 of the IRC, and, to the best knowledge of Borrower, nothing
has occurred
that would cause the loss of such qualification or tax-exempt
status. There
are no outstanding liabilities under Title IV of ERISA with
respect to any
Plan maintained or sponsored by Borrower or any ERISA Affiliate,
nor with
respect to any Plan to which Borrower or any ERISA Affiliate
contributes or
is obligated to contribute which could reasonably be expected to
have a
material adverse effect on the financial condition of Borrower.
No Plan
subject to Title IV of ERISA has any Unfunded Benefit Liability
which could
reasonably be expected to have a material adverse effect on the
financial
condition of Borrower. Neither Borrower nor any ERISA Affiliate
has
transferred any Unfunded Benefit Liability to a person other than
Borrower
or an ERISA Affiliate or has otherwise engaged in a transaction
that could
be subject to Sections 4069 or 4212(c) of ERISA which could
reasonably be
expected to have a material adverse effect on the financial
condition of
Borrower. Neither Borrower nor any ERISA Affiliate has incurred
nor
reasonably expects to incur (x) any liability (and no event has
occurred
which, with the giving of notice under Section 4219 of ERISA,
would result
in such liability) under Sections 4201 or 4243 of ERISA with
respect to a
Multiemployer Plan, or (y) any liability under Title IV of ERISA
(other than
premiums due but not delinquent under Section 4007 of ERISA) with
respect to
a Plan, which could, in either event, reasonably be expected to
have a
material adverse effect on the financial condition of Borrower. No
application for a funding waiver or an extension of any
amortization period
pursuant to Section 412 of the IRC has been made with respect to
any Plan.
No ERISA Event has occurred or is reasonably expected to occur
with respect
to any Plan which could reasonably be expected to have a material
adverse
effect on the financial condition of Borrower. Borrower and each
ERISA
Affiliate have complied in all material respects with the notice
and
continuation coverage requirements of Section 4980B of the IRC.
5.13 Environmental Condition. Except as set forth on
Schedule
5.13 attached hereto, none of Borrower's properties or assets has
ever been
used by Borrower or, to the best of Borrower's knowledge, by
previous owners
or operators in the disposal of, or to produce, store, handle,
treat,
release, or transport, any Hazardous Materials. None of
Borrower's
properties or assets has ever been designated or identified in any
manner
pursuant to any environmental protection statute as a Hazardous
Materials
disposal site, or a candidate for closure pursuant to any
environmental
protection statute. No lien arising under any environmental
protection
statute has attached to any revenues or to any real or personal
property
owned or operated by Borrower. Borrower has not received a
summons,
citation, notice, or directive from the Environmental Protection
Agency or
any other federal or state governmental agency concerning any
action or
omission by Borrower resulting in the releasing or disposing of
Hazardous
Materials into the environment.
5.14 Reliance by Foothill; Cumulative. Each warranty
and
representation contained in this Agreement automatically shall be
deemed
repeated with each advance and shall be conclusively presumed to
have been
relied on by Foothill regardless of any investigation made or
information
possessed by Foothill. The warranties and representations set
forth herein
shall be cumulative and in addition to any and all other
warranties and
representations that Borrower now or hereafter shall give, or
cause to be
given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit
hereunder shall be available and until full and final payment of
the
Obligations, and unless Foothill shall otherwise consent in
writing,
Borrower shall do all of the following, and shall cause each of
its
Subsidiaries, as applicable, to do all of the following:
6.1 Accounting System. Borrower shall maintain, and
shall
cause each Subsidiary of Borrower to maintain a standard and
modern system
of accounting in accordance with GAAP with ledger and account
cards or
computer tapes, discs, printouts, and records pertaining to the
Collateral
which contain information as from time to time may be requested by
Foothill.
Borrower also shall keep, and shall cause each Subsidiary of
Borrower to
keep, proper books of account showing all sales, licenses, claims,
and
allowances on its Inventory.
6.2 Collateral Reports. Borrower shall deliver to
Foothill,
no later than the tenth (10th) day of each month during the term
of this
Agreement, a detailed aging, by total, of the Accounts, a
reconciliation
statement regarding the Accounts and any credits with respect
thereto, and a
summary aging, by vendor, of all accounts payable and any book
overdraft.
Original sales or licensing invoices evidencing daily sales or
licenses
shall be mailed by Borrower to each Account Debtor with, at
Foothill's
request, a copy to Foothill, and, at Foothill's direction, at any
time that
an Event of Default has occurred and is continuing or Foothill
deems itself
insecure (in accordance with Section 1208 of the Code), the
invoices shall
indicate on their face that the Account has been assigned to
Foothill and
that all payments are to be made directly to Foothill. Borrower
shall
deliver to Foothill, as Foothill may from time to time require,
collection
reports, sales journals, invoices, original delivery receipts,
customer's
purchase orders, shipping instructions, bills of lading, and other
documentation respecting shipment arrangements. Absent such a
request by
Foothill, copies of all such documentation shall be held by
Borrower as
custodian for Foothill. In addition, from time to time, Borrower
shall
deliver to Foothill such other and additional financial and
collateral
information or documentation as Foothill may request.
6.3 Schedules of Accounts. With such regularity as
Foothill
shall require, Borrower shall provide Foothill with schedules
describing all
Accounts. Foothill's failure to request such schedules or
Borrower's
failure to execute and deliver such schedules shall not affect or
limit
Foothill's security interests or other rights in and to the
Accounts.
6.4 Financial Statements, Reports, Certificates.
Borrower
agrees to deliver to Foothill: (a) with such frequency as
Foothill may
require, but in any event within fifty (50) days after the end of
each
quarter during each of Borrower's fiscal years, a company prepared
balance
sheet, income statement, and cash flow statement covering
Borrower's
operations during such period; and (b) as soon as available, but
in any
event within one hundred (100) days after the end of each of
Borrower's
fiscal years, financial statements of Borrower for each such
fiscal year,
audited by independent certified public accountants reasonably
acceptable to
Foothill and certified, without any qualifications, by such
accountants to
have been prepared in accordance with GAAP, together with a
certificate of
such accountants addressed to Foothill stating that such
accountants do not
have knowledge of the existence of any event or condition
constituting an
Event of Default, or that would, with the passage of time or the
giving of
notice, constitute an Event of Default. Such audited financial
statements
shall include a consolidated and consolidating balance sheet and
profit and
loss statement, a consolidated cash flow statement, and, if
prepared, such
accountants' letter to management.
Together with the above, Borrower also shall deliver
to Foothill
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports,
and Form
8-K Current Reports, and any other filings made by Borrower with
the
Securities and Exchange Commission, if any, other than Forms 3, 4,
and 5
under Section 16 of the Securities Act of 1933, as amended, as
soon as the
same are filed, or any other information that is provided by
Borrower to its
shareholders, and any other report reasonably requested by
Foothill relating
to the Collateral, the Real Property, or the financial condition
of
Borrower.
Each quarter and year-end, together with the financial
statements provided pursuant to this Section 6.4, Borrower shall
deliver to
Foothill a certificate signed by its chief financial officer to
the effect
that: (i) all reports, statements, or computer prepared
information of any
kind or nature delivered or caused to be delivered to Foothill
hereunder
have been prepared in accordance with GAAP and fairly present the
financial
condition of Borrower; (ii) Borrower and its Subsidiaries are in
timely
compliance with all of its covenants and agreements hereunder;
(iii) the
representations and warranties of Borrower and its Subsidiaries
contained in
this Agreement and the other Loan Documents are true and correct
in all
material respects on and as of the date of such certificate, as
though made
on and as of such date (except to the extent that such representa
tions and
warranties relate solely to an earlier date); and (iv) on the date
of
delivery of such certificate to Foothill there does not exist any
condition
or event that constitutes an Event of Default (or, in each case,
to the
extent of any non-compliance, describing such non-compliance as to
which he
or she may have knowledge and what action Borrower and its Subsidiaries have
taken, are taking, or propose to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to
communicate
with Foothill in concert with Borrower and to release to Foothill
whatever
financial information concerning Borrower and its Subsidiaries
that Foothill
and Borrower may request. Borrower hereby irrevocably authorizes
and
directs all auditors, accountants, or other third parties to
deliver to
Foothill, at Foothill's request, with written notification of such
request
provided to Borrower, and at Borrower's expense, copies of
Borrower's and
its Subsidiaries' financial statements, papers related thereto,
and other
accounting records of any nature in their possession, and to
disclose to
Foothill any written information they may have regarding
Borrower's and its
Subsidiaries' business affairs and financial conditions.
6.5 Tax Returns. Borrower agrees to deliver to
Foothill
copies of each of Borrower's future federal income tax returns,
and any
amendments thereto, within thirty (30) days of the filing thereof
with the
Internal Revenue Service.
6.6 Designation of Inventory. Borrower shall
execute and
deliver to Foothill, no later than the tenth (10th) day of each
month during
the term of this Agreement, a designation of Inventory specifying
Borrower's
net book value of Eligible Spare Parts Inventory, the lesser of
Borrower's
cost and market value of Borrower's Eligible Raw Materials
Inventory, and
the lesser of the cost and market value of all remaining
Inventory,
specifying which Inventory is proprietary and which is open-
system, and
further specifying such other information as Foothill may
reasonably
request.
6.7 Returns. Returns and allowances, if any, as
between
Borrower and its Account Debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they
exist at
the time of the execution and delivery of this Agreement. If, at
a time
when no Event of Default has occurred and is continuing, any
Account Debtor
returns any Inventory to Borrower, Borrower promptly shall
determine the
reason for such return and, if Borrower accepts such return, issue
a credit
memorandum (with, at Foothill's request, a copy to be sent to
Foothill) in
the appropriate amount to such Account Debtor. If, at a time when
an Event
of Default has occurred and is continuing, any Account Debtor
returns any
Inventory to Borrower, Borrower promptly shall determine the
reason for such
return and, if Foothill consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to
Foothill) in
the appropriate amount to such Account Debtor. With such
regularity as
Foothill may require, but not less frequently than weekly,
Borrower shall
notify Foothill of all returns and recoveries and of all disputes
and
claims.
6.8 Title to Equipment. Upon Foothill's request,
Borrower
immediately shall deliver to Foothill, properly endorsed, any and
all
certificates of title to any items of Equipment.
6.9 Maintenance of Equipment. Borrower shall keep
and
maintain the Equipment in good operating condition and repair
(ordinary wear
and tear excepted), and make all necessary replacements thereto so
that the
value and operating efficiency thereof shall at all times be
maintained and
preserved. Borrower shall not permit any item of Equipment to
become a
fixture to real estate or an accession to other property, and the
Equipment
is now and shall at all times remain personal property.
6.10 Taxes. All assessments and taxes, whether real,
personal,
or otherwise, due or payable by, or imposed, levied, or assessed
against
Borrower and its Subsidiaries or any of their property shall be
paid in
full, before delinquency or before the expiration of any extension
period.
Borrower and its Subsidiaries shall make due and timely payment or
deposit
of all federal, state, and local taxes, assessments, or
contributions
required of them by law, and will execute and deliver to Foothill,
on
demand, appropriate certificates attesting to the payment thereof
or deposit
with respect thereto. Borrower and its Subsidiaries will make
timely
payment or deposit of all tax payments and withholding taxes
required of
them by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A.,
state disability, and local, state, and federal income taxes, and
will, upon
request, furnish Foothill with proof satisfactory to Foothill
indicating
that Borrower and its Subsidiaries have made such payments or
deposits.
6.11 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral
and the Real Property insured against loss or damage by fire,
theft,
explosion, sprinklers, and all other hazards and risks, and in
such amounts,
as are ordinarily insured against by other owners in similar
businesses.
Borrower also shall maintain business interruption, public
liability,
product liability, and property damage insurance relating to
Borrower's
ownership and use of the Collateral and the Real Property, as well
as
insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in
such
form, with such companies, and in such amounts as may be
reasonably
satisfactory to Foothill. All such policies of insurance (except
those of
public liability and property damage) shall contain a 438BFU
lender's loss
payable endorsement, or an equivalent endorsement in a form
satisfactory to
Foothill, showing Foothill as sole loss payee thereof, and shall
contain a
waiver of warranties, and shall specify that the insurer must give
at least
ten (10) days prior written notice to Foothill before canceling
its policy
for any reason. Borrower shall deliver to Foothill certified
copies of such
policies of insurance and evidence of the payment of all premiums
therefor.
All proceeds payable under any such policy shall be payable to
Foothill to
be applied on account of the Obligations.
(c) Borrower shall provide written notice to
Foothill of
the occurrence of any of the following events within five (5)
Business Days
after the occurrence of such event: any asset or property owned
or used by
Borrower is (i) damaged or destroyed, or suffers any material
loss, or (ii)
condemned, confiscated, or otherwise taken, in whole or in part,
or the use
thereof is otherwise diminished so as to render impracticable or
unreasonable the use of such asset or property for the purposes
for which
such asset or property was used immediately prior to such
condemnation,
confiscation, or taking, by exercise of the powers of condemnation
or
eminent domain or otherwise, and in any such case the amount of
the damage,
destruction, loss or diminution in value is in excess of Two
Hundred Fifty
Thousand Dollars ($250,000) (collectively, a "Casualty Loss").
Borrower
diligently shall file and prosecute its claim or claims for any
award or
payment in connection with a Casualty Loss. In the event of a
Casualty
Loss, Borrower shall pay to Foothill, promptly upon receipt
thereof, any and
all insurance proceeds and payments received by Borrower on
account of
damage, destruction, loss, condemnation, or eminent domain
proceedings.
Foothill may, in the exercise of its reasonable judgment, either
(x) apply
the proceeds realized from Casualty Losses to payment of
outstanding
Obligations, or (y) pay such proceeds to Borrower to be used to
repair,
replace, or rebuild the asset or property or portion thereof that
was the
subject of the Casualty Loss. After the occurrence and during the
continuance of an Event of Default, (i) no settlement on account
of any such
Casualty Loss shall be made without the consent of Foothill and (ii)
Foothill may participate in any such proceedings and Borrower
shall deliver
to Foothill such documents as may be requested by Foothill to
permit such
participation and shall consult with Foothill, its attorneys, and
its agents
in the making and prosecution of such claim or claims. Borrower
hereby
irrevocably authorizes and appoints Foothill its attorney-in-fact,
after the
occurrence and continuance of an Event of Default, to collect and receive
for any such award or payment and to file and prosecute such claim
or
claims, which power of attorney shall be irrevocable and shall be
deemed to
be coupled with an interest, and Borrower shall, upon demand of
Foothill,
make, execute, and deliver any and all assignments and other
instruments
sufficient for the purpose of assigning any such award or payment
to
Foothill, free and clear of any encumbrances of any kind or nature
whatsoever.
6.12 Financial Covenants. Borrower shall maintain:
(a) Current Ratio. A ratio of Consolidated
Current
Assets divided by Consolidated Current Liabilities of at least six
tenths to
one (0.60 : 1.0), measured on a fiscal quarter-end basis;
(b) Total Liabilities to Tangible Net Worth
Ratio. A
ratio of Borrower's total liabilities divided by Tangible Net
Worth of not
more than two and nine tenths to one (2.90 : 1.0), measured on a
fiscal
quarter-end basis;
(c) Tangible Net Worth. Tangible Net Worth of
at least
Twenty Six Million Dollars ($26,000,000), measured on a fiscal
quarter-end
basis; and
(d) Total Obligations to Annualized Service
Revenues. A
ratio of the total amount outstanding under Section 2.1 and the
Term Note
divided by the Annualized Service Revenues of not more than
0.35:1, as
measured on a fiscal quarter-end basis.
6.13 No Setoffs or Counterclaims. All payments
hereunder and
under the other Loan Documents made by or on behalf of Borrower or
any
Subsidiary shall be made without setoff or counterclaim and free
and clear
of, and without deduction or withholding for or on account of, any
federal,
state, or local taxes.
6.14 Location of Inventory and Equipment. Borrower
shall keep
the Inventory and Equipment only at the locations identified on
Schedule
6.14; provided, however, that Borrower may amend Schedule 6.14 so
long as
such amendment occurs by written notice to Foothill not less than
thirty
(30) days prior to the date on which the Inventory or Equipment is
moved to
such new location, so long as such new location is within the
continental
United States, and so long as, at the time of such written
notification,
Borrower provides any financing statements or fixture filings
necessary to
perfect and continue perfected Foothill's security interests in
such assets
and, at Foothill's request based upon a reasonable evaluation of
the value
of the Collateral in such location, also provides to Foothill a
landlord's
waiver in form and substance satisfactory to Foothill.
6.15 Compliance with Laws. Borrower shall comply,
and shall
cause its Subsidiaries to comply, with the requirements of all
applicable
aws, rules, regulations, and orders of any governmental authority,
including
the Fair Labor Standards Act and the Americans With Disabilities
Act, other
than laws, rules, regulations, and orders the non-compliance with
which,
individually or in the aggregate, would not have and could not
reasonably be
expected to have a material adverse effect on the business,
operations,
condition (financial or otherwise), finances, or prospects of
Borrower and
its Subsidiaries or on the value of the Collateral and the Real
Property to
Foothill.
6.16 Employee Benefits.
(a) Borrower promptly shall deliver to Foothill a
written
statement by the chief financial officer of Borrower specifying
the nature
of any of the following events and the actions which Borrower
proposes to
take with respect thereto, and in any event within ten (10) days
of becoming
aware of any of them, and when known, any action taken or
threatened by the
Internal Revenue Service, PBGC, Department of Labor, or other
party with
respect thereto: (i) an ERISA Event with respect to any Plan;
(ii) the
incurrence of an obligation to pay additional premium to the PBGC
under
Section 4006(a)(3)(E) of ERISA with respect to any Plan; and
(iii) any lien
on the assets of Borrower or any Subsidiary of Borrower arising in
connection with any Plan.
(b) Borrower shall also promptly furnish to Foothill
copies
prepared or received by Borrower or an ERISA Affiliate of: (i) at
the
request of Foothill, each annual report (Internal Revenue Service
Form 5500
series) and all accompanying schedules, actuarial reports,
financial
information concerning the financial status of each Plan, and
schedules
showing the amounts contributed to each Plan by or on behalf of
Borrower or
its ERISA Affiliates for the most recent three (3) plan years;
(ii) all
notices of intent to terminate or to have a trustee appointed to
administer
any Plan; (iii) all written demands by the PBGC under Subtitle D
of Title IV
of ERISA; (iv) all notices required to be sent to employees or to
the PBGC
under Section 302 of ERISA or Section 412 of the IRC; (v) all
written
notices received with respect to a Multiemployer Plan concerning
(x) the
imposition or amount of withdrawal liability pursuant to Section
4202 of
ERISA, (y) a termination described in Section 4041A of ERISA, or
(z) a
reorganization or insolvency described in Subtitle E of Title IV
of ERISA;
(vi) the adoption of any new Plan that is subject to Title IV of
ERISA or
Section 412 of the IRC by Borrower or any ERISA Affiliate;
(vii) the
adoption of any amendment to any Plan that is subject to Title IV
of ERISA
or Section 412 of the IRC, if such amendment results in a material
increase
in benefits or Unfunded Benefit Liability; or (viii) the
commencement of
contributions by Borrower or any ERISA Affiliate to any Plan that
is subject
to Title IV of ERISA or Section 412 of the IRC.
6.17 Leases. Borrower shall pay, and shall cause its
Subsidiaries to pay, when due all rents and other amounts payable
under any
leases to which Borrower or any Subsidiary of Borrower is a party
or by
which Borrower's or any Subsidiary of Borrower's properties and
assets are
bound, unless such payments are the subject of a Permitted
Protest. To the
extent that Borrower or any Subsidiary of Borrower fails timely to
make
payment of such rents and other amounts payable when due under its
leases,
Foothill shall be entitled, in its discretion, and without the
necessity of
declaring an Event of Default, to reserve an amount equal to such
unpaid
amounts from the loan availability created under Section 2.1
hereof.
6.18 Repatriation of Foreign Earnings and Profits.
Borrower
shall continue at all times after the Closing Date to cause its
foreign
Subsidiaries to repatriate their surplus earnings and profits to
Borrower in
a manner consistent with the historical practices of Borrower and
its
Subsidiaries prior to the Closing Date.
6.19 Drawing of Letters of Credit. If and whenever
there is a
drawing under any one or more of the Letters of Credit, Borrower
shall,
within twenty-four (24) hours of such drawing, give, by telephone
and in
writing, notice of such drawing.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit
hereunder shall be available and until full and final payment of
the
Obligations, Borrower will not do any of the following, and will
not permit
any of its Subsidiaries to do any of the following, without
Foothill's prior
written consent:
7.1 Indebtedness.{tc \l 2 "7.1 Indebtedness."} Create,
incur, assume, permit, guarantee, or otherwise become or remain,
directly or
indirectly, liable with respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement
or the Term
Note;
(b) Indebtedness evidenced by the Credit
Agreement as it
exists on the Closing Date;
(c) Indebtedness disclosed in the March 31,
1995
financial statements of Borrower and its Subsidiaries, other than
Indebtedness (i) owed to the Old Lenders (which Indebtedness
(other than the
Letters of Credit) shall have been repaid in full on or before the
Closing
Date), and (ii) of foreign Subsidiaries of Borrower with respect
to
overdraft lines, factoring arrangements, and similar short-term
working
capital credit facilities of such foreign Subsidiaries of Borrower
(which
Indebtedness is intended to be provided for under Section 7.1(e));
(d) Indebtedness secured by liens that are
Permitted
Liens as described in clause (d) of the definition thereof;
(e) Indebtedness of foreign Subsidiaries of
Borrower
with respect to overdraft lines, factoring arrangements, and
similar short-
term working capital credit facilities of such foreign
Subsidiaries of
Borrower; provided, however, that the aggregate amount of all such
Indebtedness together with the amount of all guarantees issued and
outstanding under Section 7.6(a) shall not exceed, at any one
time,
$2,500,000;
(f) guaranties permitted under Section 7.6 hereof;
(g) Refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c), (d), and (e) of
this Section
7.1 and continuance or renewal of any Permitted Liens associated
therewith)
so long as: (i) the terms and conditions of such refinancings,
renewals, or
extensions do not materially impair the prospects of repayment of
the
Obligations by Borrower, (ii) the net cash proceeds of such
refinancings,
renewals, or extensions do not result in an increase in the
aggregate
principal amount of the Indebtedness so refinanced, renewed, or
extended,
(iii) such refinancings, renewals, refundings, or extensions do
not result
in a shortening of the average weighted maturity of the
Indebtedness so
refinanced, renewed, or extended (it being expressly understood
that any
refinancing or replacement of the Letters of Credit must involve
replacement
letters of credit with expiry dates that are on or after the
Renewal Date),
and (iv) to the extent that Indebtedness that is refinanced was
subordinated
in right of payment to the Obligations, then the subordination
terms and
conditions of the refinancing Indebtedness must be at least as
favorable to
Foothill as those applicable to the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to
exist,
directly or indirectly, any lien on or with respect to any of its
property
or assets, of any kind, whether now owned or hereafter acquired,
or any
income or profits therefrom, except for Permitted Liens (including
liens
that are replacements of Permitted Liens to the extent that the
original
Indebtedness is refinanced under Section 7.1(g) and so long as the
replacement liens secure only those assets or property that
secured the
original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into
any
acquisition, merger, consolidation, reorganization, or
recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve
itself (or
suffer any liquidation or dissolution), or convey, sell, license,
assign,
lease, transfer, or otherwise dispose of, in one transaction or a
series of
transactions, all or any substantial part of its business,
property, or
assets, whether now owned or hereafter acquired, or acquire by
purchase or
otherwise all or substantially all of the properties, assets,
stock, or
other evidence of beneficial ownership of any Person.
7.4 Extraordinary Transactions and Disposal of
Assets. Except
for the Permitted Real Property Dispositions (each of which is
subject to
the provisions of Section 2.8 hereof), enter into any transaction
not in the
ordinary and usual course of Borrower's or its Subsidiaries'
business,
including the sale, license, lease, or other disposition of,
moving,
relocation, or transfer, whether by sale, license, or otherwise,
of any of
Borrower's or its Subsidiaries' properties or assets. After the
Closing
Date, Borrower and its Subsidiaries shall not enter into any
contract,
lease, license, or agreement (other than Product Agreements
containing
general restrictions on assignment that do not specifically
prohibit the
creation of security interests by Borrower or its Subsidiaries in
their
rights to payment, if any, thereunder), or any modification or
amendment of
any contract, lease, license, or agreement, that prohibits
Borrower or its
Subsidiaries from pledging, assigning, or encumbering their rights
under
such contract, lease, license, or agreement.
7.5 Change Name. Change Borrower's or any
Subsidiaries' name,
FEIN, business structure, or identity, or add any new fictitious
name.
7.6 Guarantee. Guarantee or otherwise become in any
way
liable with respect to the obligations of any third Person except
by
endorsement of instruments or items of payment for deposit to the
account of
Borrower or which are transmitted or turned over to Foothill. The
foregoing
notwithstanding, (a) Borrower may guarantee the Indebtedness of
its foreign
Subsidiaries with respect to overdraft lines, factoring
arrangements, and
similar short-term working capital credit facilities of such
foreign
Subsidiaries of Borrower; provided, however, that the aggregate
amount of
all such guaranties together with the amount of all Indebtedness
outstanding
under Section 7.1(e) shall not exceed, at any one time,
$2,500,000, (b)
Borrower may guarantee the Indebtedness of one or more joint
ventures as to
which it is a venturer so long as such joint ventures are formed
for the
purpose of the same business as Borrower or businesses reasonably
incidental
thereto; provided, however, that the aggregate amount of all such
guarantees
and all investments (as described in Section 7.15(a)) in such
joint ventures
during the term of this Agreement shall not exceed One Million
Dollars
($1,000,000), and (c) so long as the Liquidity Conditions are
satisfied
after giving effect to each such proposed guaranty, Borrower may
guaranty
the Indebtedness of Concurrent Nippon; provided, however, that the
aggregate
amount of all such guarantees and all other investments (as
described in
Section 7.15(d)) in Concurrent Nippon shall not exceed the amount
permitted
by Section 7.15(d).
7.7 Restructure. Make any change in Borrower's
financial
structure, the principal nature of Borrower's or its Subsidiaries'
business
operations, or the date of their fiscal year.
7.8 Prepayments. Except in connection with a
refinancing
permitted by Section 7.1(g), prepay any Indebtedness owing to any
third
Person.
7.9 Repayments. Make a payment in respect of the
Indebtedness
owed to Old Lenders' Agent or the Old Lenders that they are not
permitted to
receive, collect, or retain under the terms and conditions of the
Intercreditor Agreement.
7.10 Change of Control. Cause, permit, or suffer,
directly or
indirectly, any Change of Control.
7.11 Capital Expenditures. Make any capital
expenditure, or
any commitment therefor, [where the aggregate amount of such
capital
expenditures, made or committed in any fiscal year, in excess of
Six Million
Five Hundred Thousand Dollars ($6,500,000), Eight Million Dollars
($8,000,000), and Nine Million Dollars ($9,000,000) for fiscal
years 1996,
1997, and 1998 and beyond, respectively, provided that if the
aggregate
amount of capital expenditures made or committed by Borrower
during any such
fiscal year is less than the maximum amount permitted hereby
(after taking
into account any increases in such amount as a result of this
proviso) for
such fiscal year, the amount of capital expenditures permitted for
the
succeeding fiscal year shall be increased by such difference, but
in no
event shall the amount of such capital expenditures for any fiscal
year
exceed Ten Million Dollars (10,000,000).
7.12 Consignments. Consign any Inventory or sell any
Inventory
on bill and hold, sale or return, sale on approval, or other
conditional
terms of sale; provided, however, that bill and hold Accounts
shall not be
prohibited by reason of this Section 7.12 if they are subject to
documentation, in form and substance satisfactory to Foothill, clearly
evidencing that the obligation of the Account Debtor is absolute
and
unconditional notwithstanding the failure of Borrower to deliver
the subject goods or software.
7.13 Distributions. Make any distribution or declare
or pay
any dividends (in cash or other property, other than capital
stock) on, or
purchase, acquire, redeem, or retire any of Borrower's capital
stock, of any
class, whether now or hereafter outstanding.
7.14 Accounting Methods. Modify or change its method
of
accounting or enter into, modify, or terminate any agreement
currently
existing, or at any time hereafter entered into with any third
party
accounting firm or service bureau for the preparation or storage
of
Borrower's or its Subsidiaries' accounting records without said
accounting
firm or service bureau agreeing, subject to the provisions of
Section 6.4
hereof, to provide Foothill information regarding the Collateral
and the
Real Property or Borrower's and its Subsidiaries' financial
condition.
Borrower, on its own behalf and on behalf of each of its
Subsidiaries,
waives the right to assert a confidential relationship, if any, it
may have
with any accounting firm or service bureau in connection with any
information requested by Foothill pursuant to or in accordance
with this
Agreement, and agrees that Foothill may contact directly any such
accounting
firm or service bureau in order to obtain such information.
7.15 Investments. Directly or indirectly make any
investment
or acquire any beneficial interest in (including stock,
partnership
interest, or other securities of), or make any loan, advance,
deferral of
repayment of Accounts, or capital contribution to, any Person;
provided,
however, that, so long as no Event of Default has occurred and is
continuing, Borrower shall be entitled to make the following
investments:
(a) the making or acquisition of beneficial interests in, or the
making of
loans, advances, or capital contributions to, one or more joint
ventures as
to which it is a venturer so long as such joint ventures are
formed for the
purpose of engaging in the same business as Borrower or businesses
reasonably incidental thereto; provided, however, that the
aggregate amount
of all such investments made during the term of this Agreement and all
guarantees (as described in Section 7.6(b)) made by Borrower
during the term
of this Agreement in connection with such joint ventures shall not
exceed
One Million Dollars ($1,000,000) and prior to making any such
investment
Borrower shall hypothecate to Foothill, pursuant to agreements in
form and
substance satisfactory to Foothill, the investment to be acquired,
(b) the
acquisition by Borrower of beneficial interests in, or the making
of loans,
advances, or capital contributions by Borrower as a result of the
performance by it of its obligations under the guarantees permitted under
Section 7.6(b) hereof, (c) the making or acquisition of beneficial
interests
in, or the making of loans, advances, or capital contributions to
foreign
Subsidiaries of Borrower (it being understood that this does not
include the
Inactive Subsidiaries and Concurrent Nippon) in an aggregate
amount not to
exceed One Million Dollars ($1,000,000); provided, however, that
the sole
purpose for making such investments must be to satisfy a mandatory
statutory
obligation imposed upon Borrower or such foreign Subsidiary, and
(d) so long
as the Liquidity Conditions are satisfied after giving effect to
each such
proposed investment, investments in Concurrent Nippon equal to an
aggregate
amount not to exceed, as of any date of determination, (i) Five
Hundred
Forty Million Yen (540,000,000), minus (ii) the then Yen
equivalent of the
amount available to be drawn under the Letters of Credit, plus the
then Yen
equivalent of the amount drawn under the Letters of Credit, plus
the then
Yen equivalent of the aggregate amount of Accounts owed by
Concurrent Nippon
to Borrower outstanding in excess of ninety (90) days, plus the
maximum
amount that Borrower may be required to pay under guaranties of
lines of
credit made available by third party lenders to Concurrent Nippon.
7.16 Transactions with Affiliates. Directly or
indirectly
enter into or permit to exist any material transaction with any
Affiliate of
Borrower except for transactions that are in the ordinary course
of
Borrower's business, upon fair and reasonable terms, that are
fully
disclosed to Foothill, and that are no less favorable to Borrower
than would
be obtained in an arm's length transaction with a non-Affiliate.
7.17 Suspension. Suspend or go out of a substantial
portion of
its business.
7.18 Compensation. Increase the annual fee or per-
meeting fees
paid to directors during any year by more than fifteen percent
(15%) over
the prior year.
7.19 Use of Proceeds. Use the proceeds of the
advances made
hereunder for any purpose other than: (a) on the Closing Date, (i)
to repay
in full the outstanding principal, accrued interest, and accrued
fees and
expenses owing to the Old Lenders, exclusive, however, of the
Letters of
Credit, and (ii) to pay transactional costs and expenses incurred
in
connection with this Agreement; and (b) thereafter, consistent
with the
terms and conditions hereof, for its lawful and permitted
corporate
purposes.
7.20 Change in Location of Chief Executive Office;
Inventory
and Equipment with Bailees. Without thirty (30) days prior
written
notification to Foothill, relocate its chief executive office to a
new
location and so long as, at the time of such written notification,
Borrower
provides any financing statements or fixture filings necessary to
perfect
and continue perfected Foothill's security interests and also
provides to
Foothill a landlord's waiver in form and substance satisfactory to
Foothill.
The Inventory and Equipment shall not at any time now or hereafter
be stored
with a bailee, warehouseman, or similar party without Foothill's
prior
written consent.
7.21 Inactive Subsidiaries. Permit any Inactive
Subsidiary to
own assets that have a value in excess of Twenty-Five Thousand
Dollars
($25,000) or to conduct any business operations.
7.22 Amendment of Credit Agreement. Amend or modify
the Credit
Agreement and related documents in any respect that increases the
rates of
interest or fees payable with respect thereto, shortens the
scheduled
maturity thereo, foreshortens the expiry date of any letter of
credit issued
pursuant to the Credit Agreement, adds or modifies events of
default, or
adds or modifies representations, warranties, or covenants of
Borrower,
unless Foothill, in its sole and absolute discretion, shall have
consented
in writing to such amendment or modification.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall
constitute an
event of default (each, an "Event of Default") under this
Agreement:
8.1 If Borrower fails to pay when due and payable or
when
declared due and payable, any portion of the Obligations (whether
of
principal, interest (including any interest which, but for the
provisions of
the Bankruptcy Code, would have accrued on such amounts), fees and
charges
due Foothill, reimbursement of Foothill Expenses, or other amounts
constituting Obligations);
8.2 (a) If Borrower or any Subsidiary of Borrower
fails or
neglects to perform, keep, or observe any term, provision,
condition,
covenant, or agreement contained in Sections 6.2 (Collateral
Reports), 6.3
(Schedule of Accounts), or 6.7 (Designation of Inventory) of this
Agreement
and such failure continues for a period of five (5) days from the
date of
such failure or neglect; (b) If Borrower or any Subsidiary of
Borrower fails
or neglects to perform, keep, or observe any term, provision,
condition,
covenant, or agreement contained in Sections 6.4 (Financial
Statements), 6.5
(Tax Returns), 6.8 (Title to Equipment), 6.14 (Location of
Inventory and
Equipment), 6.15 (Compliance with Laws), or 6.17 (Leases) of this
Agreement
and such failure continues for a period of ten (10) days from the
date of
such failure or neglect; (c) If Borrower or any Subsidiary of
Borrower fails
or neglects to perform, keep, or observe any term, provision,
condition,
covenant, or agreement contained in Section 6.9 (Maintenance of
Equipment)
of this Agreement and such failure continues for a period of
fifteen (15)
days from the date Foothill sends Borrower written notice of such
failure or
neglect; (d) If Borrower or any Subsidiary of Borrower fails or
neglects to
perform, keep, or observe any other term, provision, condition,
covenant, or
agreement contained in this Agreement, in any of the Loan
Documents, or in
any other present or future agreement between any Debtor and
Foothill (other
than any such term, provision, condition, covenant, or agreement
that is the
subject of another provision of this Section 8);
8.3 If there is a material impairment of the
prospect of
repayment of any portion of the Obligations owing to Foothill or a
material
impairment of the value or priority of Foothill's security
interests in the
Collateral or the Real Property;
8.4 If any material portion of Borrower's properties
or assets
is attached, seized, subjected to a writ or distress warrant, or
is levied
upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by
Borrower;
8.6 If an Insolvency Proceeding is commenced against
Borrower
or any Subsidiary of Borrower and any of the following events
occur:
(a) Borrower or any Subsidiary of Borrower consents to the
institution of
the Insolvency Proceeding against it; (b) the petition commencing
the
Insolvency Proceeding is not timely controverted; (c) the petition
commencing the Insolvency Proceeding is not dismissed within
forty-five (45)
calendar days of the date of the filing thereof; provided,
however, that,
during the pendency of such period, Foothill shall be relieved of
its
obligation to make additional advances hereunder; (d) an interim
trustee is
appointed to take possession of all or a substantial portion of
the
properties or assets of, or to operate all or any substantial
portion of the
business of, Borrower or any Subsidiary of Borrower; or (e) an
order for
relief shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any
way
prevented by court order from continuing to conduct all or any
material part
of its business affairs;
8.8 (a) If a notice of lien, levy, or assessment is
filed of
record with respect to any of Borrower's properties or assets by
the United
States, or if any taxes or debts owing at any time hereafter to
the United
States becomes a lien, whether choate or otherwise, upon any of
Borrower's
properties or assets; or (b) If a notice of lien, levy, or
assessment is
filed of record with respect to any of Borrower's properties or
assets by
any state, county, municipal, or other non-federal governmental
agency, or
if any taxes or debts owing at any time hereafter to any one or
more of such
entities becomes a lien, whether choate or otherwise, upon any of
Borrower's
properties or assets and, in any such case, such taxes or debts
are not the
subject of a Permitted Protest and relate to an amount in excess
of One
Hundred Thousand Dollars ($100,000);
8.9 If a judgment or other claim becomes a lien or
encumbrance
upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement
(including, the Credit Agreement) to which Borrower is a party
with one or
more third Persons resulting in a right by such third Persons,
irrespective
of whether exercised, to accelerate the maturity of Borrower's
obligations
thereunder;
8.11 If Borrower makes any payment on account of
Indebtedness
that has been contractually subordinated in right of payment to
the payment
of the Obligations, except to the extent such payment is permitted
by the
terms of the subordination provisions applicable to such
Indebtedness;
8.12 If any material misstatement or
misrepresentation exists
now or hereafter in any warranty, representation, statement, or
report made
to Foothill by Borrower or any Subsidiary of Borrower or any
officer,
employee, agent, or director of Borrower or any Subsidiary of Borrower, or
if any such warranty or representation is withdrawn;
8.13 If the obligation of any guarantor or other
third Person
under any Loan Document is limited or terminated by operation of
law or by
the guarantor or other third Person thereunder, or any such
guarantor or
other third Person becomes the subject of an Insolvency
Proceeding;
8.14 If (a) with respect to any Plan, there shall
occur any of
the following which could reasonably be expected to have a
material adverse
effect on the financial condition of Borrower: (i) the violation
of any of
the provisions of ERISA; (ii) the loss by a Plan intended to be a
Qualified
Plan of its qualification under Section 401(a) of the IRC; (iii)
the
incurrence of liability under Title IV of ERISA; (iv) a failure to
make full
payment when due of all amounts which, under the provisions of any
Plan or
applicable law, Borrower or any ERISA Affiliate is required to
make; (v) the
filing of a notice of intent to terminate a Plan under Sections
4041 or
4041A of ERISA; (vi) a complete or partial withdrawal of Borrower
or an
ERISA Affiliate from any Plan; (vii) the receipt of a notice by
the plan
administrator of a Plan that the PBGC has instituted proceedings
to
terminate such Plan or appoint a trustee to administer such Plan;
(viii) a
commencement or increase of contributions to, or the adoption of
or the
amendment of, a Plan; and (ix) the assessment against Borrower or
any ERISA
Affiliate of a tax under Section 4980B of the IRC; or (b) the
Unfunded
Benefit Liability of all of the Plans of Borrower and its ERISA
Affiliates
shall, in the aggregate, exceed One Million Five Hundred Thousand
Dollars
($1,500,000);
8.15 If and whenever there is a drawing under any one
of more
of the Letters of Credit; or
8.16 If, within ten (10) days of the Closing Date,
the expiry date of the Letters of Credit has not been extended by
the Old Lenders' Agent with the respective beneficiaries thereof.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and
during the
continuation, of an Event of Default Foothill may, at its
election, without
notice of its election and without demand, do any one or more of
the
following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced
by this
Agreement, by any of the other Loan Documents, or otherwise,
immediately due
and payable;
(b) Cease advancing money or extending credit
to or for
the benefit of Borrower under this Agreement, under any of the
Loan
Documents, or under any other agreement between Borrower and
Foothill;
(c) Terminate this Agreement and any of the
other Loan
Documents as to any future liability or obligation of Foothill,
but without
affecting Foothill's rights and security interests in the
Collateral or the
Real Property and without affecting the Obligations;
(d) Settle or adjust disputes and claims
directly with
Account Debtors for amounts and upon terms which Foothill
considers
advisable, and in such cases, Foothill will credit Borrower's loan
account
with only the net amounts received by Foothill in payment of such
disputed
Accounts after deducting all Foothill Expenses incurred or
expended in
connection therewith;
(e) Cause Borrower to hold all returned
Inventory in
trust for Foothill, segregate all returned Inventory from all
other property
of Borrower or in Borrower's possession and conspicuously label
said
returned Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower
or any
guarantor, make such payments and do such acts as Foothill
considers
necessary or reasonable to protect its security interests in the
Collateral.
Borrower agrees to assemble the Collateral if Foothill so
requires, and to
make the Collateral available to Foothill as Foothill may
designate.
Borrower authorizes Foothill to enter the premises where the
Collateral is
located, to take and maintain possession of the Collateral, or any
part of
it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or
lien that in Foothill's determination appears to conflict with its
security
interests and to pay all expenses incurred in connection
therewith. With
respect to any of Borrower's owned premises, Borrower hereby
grants Foothill
a license to enter into possession of such premises and to occupy
the same,
without charge, for up to one hundred twenty (120) days in order
to exercise
any of Foothill's rights or remedies provided herein, at law, in
equity, or
otherwise;
(g) Without notice to Borrower (such notice
being
expressly waived), and without constituting a retention of any
collateral in
satisfaction of an obligation (within the meaning of Section 9505
of the
Code), set off and apply to the Obligations any and all (i)
balances and
deposits of Borrower held by Foothill (including any amounts
received in the
Lockbox Accounts), or (ii) indebtedness at any time owing to or
for the
credit or the account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all
balances and
deposits of Borrower held by Foothill, and any amounts received in
the
Lockbox Accounts, to secure the full and final repayment of all of
the
Obligations;
(i) Ship, reclaim, recover, store, finish,
maintain,
repair, prepare for sale or license, advertise for sale or
license, and sell
or license (in the manner provided for herein) the Collateral.
Foothill is
hereby granted a license or other right to use, without charge,
Borrower's
labels, patents, copyrights, source code, software, rights of use
of any
name, trade secrets, trade names, trademarks, service marks, and
advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale or
license,
and selling or licensing any Collateral and Borrower's rights
under all
licenses and all franchise agreements shall inure to Foothill's
benefit;
(j) Sell the Collateral at either a public or
private
sale, or both, by way of one or more contracts or transactions,
for cash or
on terms, in such manner and at such places (including Borrower's
premises)
as Foothill determines is commercially reasonable. It is not
necessary that
the Collateral be present at any such sale;
(k) Foothill shall give notice of the
disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each
holder of
a security interest in the Collateral who has filed with Foothill
a written
request for notice, a notice in writing of the time and place of
public
sale, or, if the sale is a private sale or some other disposition
other than
a public sale is to be made of the Collateral, then the time on or
after
which the private sale or other disposition is to be made;
(2) The notice shall be personally
delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at
least
five (5) days before the date fixed for the sale, or at least five
(5) days
before the date on or after which the private sale or other
disposition is
to be made; no notice needs to be given prior to the disposition
of any
portion of the Collateral that is perishable or threatens to
decline
speedily in value or that is of a type customarily sold on a
recognized
market. Notice to Persons other than Borrower claiming an
interest in the
Collateral shall be sent to such addresses as they have furnished
to
Foothill;
(3) If the sale is to be a public sale,
Foothill
also shall give notice of the time and place by publishing a
notice one time
at least five (5) days before the date of the sale in a newspaper
of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at
any public
sale;
(m) Any deficiency that exists after
disposition of the
Collateral as provided above will be paid immediately by Borrower.
Any
excess will be returned, without interest and subject to the
rights of third
Persons, by Foothill to Borrower; and
(n) In addition to the foregoing rights,
Foothill shall
have all of the other rights and remedies provided for at law or
in equity
and such other rights and remedies available to it as are provided
for in
any other Loan Document, including, the Mortgages.
9.2 Remedies Cumulative. Foothill's rights and
remedies under
this Agreement, the Loan Documents, and all other agreements shall
be
cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in
equity. No
exercise by Foothill of one right or remedy shall be deemed an
election, and
no waiver by Foothill of any Event of Default shall be deemed a
continuing
waiver. No delay by Foothill shall constitute a waiver, election,
or
acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third
Persons, or
fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then,
to the
extent that Foothill determines that such failure by Borrower
could have a
material adverse effect on Foothill's interests in the Collateral
or the
Real Property, in its discretion and with concurrent notice to
Borrower,
Foothill may do any or all of the following: (a) make payment of
the same
or any part thereof; (b) set up such reserves in Borrower's loan
account as
Foothill deems necessary to protect Foothill from the exposure
created by
such failure; or (c) obtain and maintain insurance policies of the
type
described in Section 6.12, and take any action with respect to
such policies
as Foothill deems prudent. Any such amounts paid by Foothill
shall
constitute Foothill Expenses. Any such payments made by Foothill
shall not
constitute an agreement by Foothill to make similar payments in
the future
or a waiver by Foothill of any Event of Default under this
Agreement.
Foothill need not inquire as to, or contest the validity of, any
such
expense, tax, security interest, encumbrance, or lien and the
receipt of the
usual official notice for the payment thereof shall be conclusive
evidence
that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives demand,
protest,
notice of protest, notice of default or dishonor, notice of
payment and
onpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by
Foothill on
which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as
Foothill
complies with its obligations, if any, under Section 9207 of the
Code,
Foothill shall not in any way or manner be liable or responsible
for: (a)
the safekeeping of the Collateral; (b) any loss or damage thereto
occurring
or arising in any manner or fashion from any cause; (c) any
diminution in
the value thereof; or (d) any act or default of any carrier,
warehouseman,
bailee, forwarding agency, or other Person. All risk of loss,
damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to defend,
indemnify,
save, and hold Foothill and its officers, employees, and agents
harmless
against: (a) all obligations, demands, claims, and liabilities
claimed or
asserted by any other Person arising out of or relating to the
transactions
contemplated by this Agreement or any other Loan Document,
including any
claim of any broker or finder, and (b) all losses (including
attorneys fees
and disbursements) in any way suffered, incurred, or paid by
Foothill as a
result of or in any way arising out of, following, or
consequential to the
transactions contemplated by this Agreement or any other Loan
Document. This
provision shall survive the termination of this Agreement.
12. NOTICES.
Unless otherwise provided in this Agreement, all
notices or
demands by any party relating to this Agreement or any other Loan
Document
shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail,
postage
prepaid) shall be personally delivered or sent by registered or
certified
mail, postage prepaid, return receipt requested, or by prepaid
telex, TWX,
telefacsimile, or telegram (with messenger delivery specified) to
Borrower
or to Foothill, as the case may be, at its address set forth
below:
If to Borrower: CONCURRENT COMPUTER CORPORATION
2 Crescent Place
Oceanport, New Jersey 07757
Attn: Mr. Roger J. Mason
with copies to: CONCURRENT COMPUTER CORPORATION
2 Crescent Place
Oceanport, New Jersey 07757
Attn: Kevin J. Dell, Esq.
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
with copies to: BROBECK, PHLEGER & HARRISON
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
The parties hereto may change the address at which
they are to
receive notices hereunder, by notice in writing in the foregoing
manner
given to the other. All notices or demands sent in accordance
with this
Section 12, other than notices by Foothill in connection with
Sections 9504
or 9505 of the Code, shall be deemed received on the earlier of
the date of
actual receipt or three (3) days after the deposit thereof in the
mail.
Borrower acknowledges and agrees that notices sent by Foothill in
connection
with Sections 9504 or 9505 of the Code shall be deemed sent when
deposited
in the mail or transmitted by telefacsimile or other similar
method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL
BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF
THE STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY
IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE
OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN
WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH
OF
BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH
THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF
ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT
THAT EACH
HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other
papers
delivered to Foothill may be destroyed or otherwise disposed of by
Foothill
four (4) months after they are delivered to or received by
Foothill, unless
Borrower requests, in writing, the return of said documents,
schedules, or
other papers and makes arrangements, at Borrower's expense, for
their
return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding
and deemed
effective when executed by Borrower
and Foothill.
15.2 Successors and Assigns. This Agreement shall
bind and
inure to the benefit of the respective successors and assigns of
each of the
parties; provided, however, that Borrower may not assign this
Agreement or
any rights or duties hereunder without Foothill's prior written
consent and
any prohibited assignment shall be absolutely void. No consent to
an
assignment by Foothill shall release Borrower from its
Obligations.
Foothill may assign this Agreement and its rights and duties
hereunder and
no consent or approval by Borrower is required in connection with
any such
assignment. Foothill reserves the right to sell, assign,
transfer,
negotiate, or grant participations in all or any part of, or any
interest in
Foothill's rights and benefits hereunder. In connection with any
such
assignment or participation, Foothill may disclose all documents
and
information which Foothill now or hereafter may have relating to
Borrower or
Borrower's business. To the extent that Foothill assigns its
rights and
obligations hereunder to a third Person, Foothill thereafter shall
be
released from such assigned obligations to Borrower and such
assignment
shall effect a novation between Borrower and such third Person.
Anything to
the contrary contained herein notwithstanding, Foothill agrees
that (a) so
long as no Event of Default has occurred and is continuing,
Foothill will
not assign any of its rights and obligations hereunder to a third
Person
known to be engaged in a business that is directly competitive
with the
business of Borrower or to a third Person known to have a
significant investment, directly or indirectly, in a Person that
is engaged in a
business that is directly competitive with the business of
Borrower, and (b)
the costs and expenses of any participant of Foothill shall not be
for the
account of Borrower.
15.3 Section Headings. Headings and numbers have
been set
forth herein for convenience only. Unless the contrary is
compelled by the
context, everything contained in each section applies equally to
this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved
against
Foothill or Borrower, whether under any rule of construction or
otherwise.
On the contrary, this Agreement has been reviewed by all parties
and shall
be construed and interpreted according to the ordinary meaning of
the words
used so as to fairly accomplish the purposes and intentions of all
parties
hereto.
15.5 Severability of Provisions. Each provision of
this
Agreement shall be severable from every other provision of this
Agreement
for the purpose of determining the legal enforceability of any
specific
provision.
15.6 Amendments in Writing. This Agreement can only
be amended
by a writing signed by both
Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This
Agreement may
be executed in any number of counterparts and by different parties
on
separate counterparts, each of which, when executed and delivered,
shall be
deemed to be an original, and all of which, when taken together,
shall
constitute but one and the same Agreement. Delivery of an
executed
counterpart of this Agreement by telefacsimile shall be equally as
effective
as delivery of a manually executed counterpart of this Agreement.
Any party
delivering an executed counterpart of this Agreement by
telefacsimile also
shall deliver a manually executed counterpart of this Agreement
but the
failure to deliver a manually executed counterpart shall not
affect the
validity, enforceability, and binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If
the
incurrence or payment of the Obligations by Borrower or any
guarantor of the
Obligations or the transfer by either or both of such parties to
Foothill of
any property of either or both of such parties should for any
reason
subsequently be declared to be void or voidable under any state or
federal
law relating to creditors' rights, including provisions of the
Bankruptcy
Code relating to fraudulent conveyances, preferences, and other
voidable or
recoverable payments of money or transfers of property
(collectively, a
"Voidable Transfer"), and if Foothill is required to repay or
restore, in
whole or in part, any such Voidable Transfer, or elects to do so
upon the
reasonable advice of its counsel, then, as to any such Voidable
Transfer, or
the amount thereof that Foothill is required or elects to repay or
restore,
and as to all reasonable costs, expenses, and attorneys fees of
Foothill
related thereto, the liability of Borrower or such guarantor
automatically
shall be revived, reinstated, and restored and shall exist as
though such
Voidable Transfer had never been made.
15.9 Integration. This Agreement, together with the
other Loan
Documents, reflects the entire understanding of the parties with
respect to
the transactions contemplated hereby and shall not be contradicted
or
qualified by any other agreement, oral or written, before the date
hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this
Agreement to be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /S/ Patricia McLoughlin
Patricia McLoughlin
Vice President
CONCURRENT COMPUTER CORPORATION,
a Delaware corporation
By: /S/ Kevin J. Dell
Kevin J. Dell
Vice President, General
Counsel and Secretary
??
BPHLA\KLB\0324946.06
June 29, 1995
-{page \* roman}-
BPHLA\KLB\0324946.06
June 29, 1995
-{page \* roman}-
Exhibit 22.0
CONCURRENT COMPUTER CORPORATION SUBSIDIARIES
SUBSIDIARY NAME JURISDICTION OF
INCORPORATION/ORGANIZATION
DOMESTIC
Concurrent Computer Corp. (France) Delaware, USA
Concurrent Computer Asia Corp. Delaware, USA
Concurrent Securities Corp. Massachusetts, USA
FOREIGN
Concurrent Computer Corp. Pty. Ltd. Australia
Concurrent Computer Belgium B.V./S.A. Belgium
Concurrent Computer Canada, Inc. Canada
Concurrent Computer France S.A. France
Concurrent Computer GmbH Germany
Concurrent Computer Hellas, EPE Greece
Concurrent Computer Hong Kong Limited Hong Kong
Concurrent Computer Ireland, Ltd. Ireland
Concurrent Computer Italia S.r.l. Italy
Concurrent Nippon Corporation Japan (60%)
Concurrent Nederland B.V. The Netherlands
Concurrent Computer New Zealand New Zealand
Concurrent Computer Far East Pte. Ltd. Singapore
Concurrent Computer Hispania, S.A. Spain
Concurrent Computer Holding Co. Ltd. United Kingdom
Concurrent Computer Nederland, Ltd. United Kingdom
Concurrent Computer Corporation, Ltd. United Kingdom
Concurrent Computer Scandinavia Limited United Kingdom
Exhibit 10.7(i)
CONCURRENT COMPUTER CORPORATION
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 29, 1995
FLEET BANK OF MASSACHUSETTS, N.A.
and
CIBC Inc.
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience only.
Page
Section 1. Definitions and Accounting Matters 1
1.01. Certain Defined Terms 1
1.02. Accounting Terms and Determinations 6
1.03. Dollar Equivalents 7
Section 2. Tinton Falls Fee and Restructuring Fee 7
Section 3. The Standby L/C s; Several Obligations, Etc 8
3.01 The Standby L/C s 8
3.02 Several Obligations, Etc 9
3.03. Intentionally Omitted . . . . . . . . . . . . . . 9
3.04. Intentionally Omitted . . . . . . . . . . . . . . .9
3.05. Intentionally Omitted . . . . . . . . . . . . . . 10
Section 4. Intentionally Omitted . . . . . . . . . . . . . . 10
Section 5. Payments; Pro Rata Treatment; Computations; Etc . 10
5.01. Payments. . . . . . . . . . . . . . . . . . . . . 10
5.02. Pro Rata Treatment. . . . . . . . . . . . . . . . 10
5.03. Computations. . . . . . . . . . . . . . . . . . . 10
5.04. Intentionally Omitted . . . . . . . . . . . . . . 11
5.05. Intentionally Omitted . . . . . . . . . . . . . . 11
5.06. Intentionally Omitted . . . . . . . . . . . . . . 11
5.07. Sharing of Payments, Etc. . . . . . . . . . . . . 11
Section 6. Yield Protection, Etc . . . . . . . . . . . . . . 12
6.01. Additional Costs. . . . . . . . . . . . . . . . . 12
6.02. Intentionally Omitted . . . . . . . . . . . . . . 12
Section 7. Conditions Precedent. . . . . . . . . . . . . . . 12
7.01. Conditions. . . . . . . . . . . . . . . . . . . . 12
7.02. Intentionally Omitted . . . . . . . . . . . . . . 15
Section 8. Representations and Warranties. . . . . . . . . . 15
8.01. Corporate Organization and Existence. . . . . . . 15
8.02. Subsidiaries. . . . . . . . . . . . . . . . . . . 15
8.03. Financial Information . . . . . . . . . . . . . . 15
8.04. Changes in Condition. . . . . . . . . . . . . . . 16
8.05. Assets. . . . . . . . . . . . . . . . . . . . . . 16
8.06. Litigation. . . . . . . . . . . . . . . . . . . . 16
8.07. Tax Returns . . . . . . . . . . . . . . . . . . . 16
8.08. No Legal Obstacle to Agreement. . . . . . . . . . 17
8.09. Defaults. . . . . . . . . . . . . . . . . . . . . 17
8.10. ERISA . . . . . . . . . . . . . . . . . . . . . . 17
8.11. Foreign Trade Regulations; . . . . . . . . . . . 18
8.12. Outstanding Indebtedness. . . . . . . . . . . . . 18
8.13. Disclosure. . . . . . . . . . . . . . . . . . . . 18
8.14. Intentionally Omitted . . . . . . . . . . . . . . 18
8.15. Hazardous Materials . . . . . . . . . . . . . . . 18
8.16. Security Documents. . . . . . . . . . . . . . . . 20
Section 9. Covenants of the Company. . . . . . . . . . . . . 21
9.01. Financial Statements. . . . . . . . . . . . . .. . . . 21
9.02. Intentionally Omitted . . . . . . . . . . . . . . 23
9.03. Existence . . . . . . . . . . . . . . . . . . . 23
9.04. Insurance . . . . . . . . . . . . . . . . . . . . 24
9.05. Prohibition of Fundamental Changes. . . . . . . . 24
9.06. Limitation on Liens . . . . . . . . . . . . . . 25
9.07. Indebtedness. . . . . . . . . . . . . . . 26
9.08. Intentionally Omitted . . . . . . . . . . . . . . 27
9.09. Intentionally Omitted . . . . . . . . . . . . . 27
9.10. Intentionally Omitted . . . . . . . . . . . . . . 27
9.11. Capital Expenditures. . . . . . . . . . . . . . 27
9.12. Intentionally Omitted . . . . . . . . . . . . . . 28
9.13. Lines of Business . . . . . . . . . . . . . . . 28
9.14. Intentionally Omitted . . . . . . . . . . . . . . 28
9.15. Intentionally Omitted . . . . . . . . . . . . . . 28
9.16. Certain Obligations Respecting Subsidiaries . . . 28
9.17. Intentionally Omitted . . . . . . . . . . . . . . 28
9.18. Intentionally Omitted . . . . . . . . . . . . . 28
9.19. Intentionally Omitted . . . . . . . . . . . . . . 28
9.20. Leases. . . . . . . . . . . . . . . . . . . 28
9.21. Intentionally Omitted . . . . . . . . . . . . 29
9.22. Intentionally Omitted . . . . . . . . . . . . 29
9.23. Intentionally Omitted . . . . . . . . . . . . . . 29
9.24. Disposition of Assets . . . . . . . . . . . . . . 29
9.25. Intentionally Omitted . . . . . . . . . . . . . . 30
9.26. Intentionally Omitted . . . . . . . . . . . . . 30
9.27. Intentionally Omitted . . . . . . . . . . . . . . 30
9.28. Intentionally Omitted . . . . . . . . . . . . . . 30
9.29. Intentionally Omitted . . . . . . . . . . . . . 30
9.30. Intentionally Omitted . . . . . . . . . . . . . . 30
9.31. Intentionally Omitted . . . . . . . . . . . . . . 30
9.32. Intentionally Omitted . . . . . . . . . . . . . . 30
9.33. Intentionally Omitted . . . . . . . . . . . . 30
9.34. Intentionally Omitted . . . . . . . . . . . . . 30
9.35. Intentionally Omitted . . . . . . . . . . . . . . 30
9.36. Intentionally Omitted . . . . . . . . . . . . 30
9.37. Intentionally Omitted . . . . . . . . . . . . . . 30
9.38. Financing Statements, Etc . . . . . . . . . . . 30
Section 10. Specified Events and Events of Default. . . . . . 30
Section 11. Acknowledgment of Agency, Etc . . . . . . . . . . 34
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . 34
12.01. Waiver. . . . . . . . . . . . . . . . . . . . . 34
12.02. Notices . . . . . . . . . . . . . . . . . . . . . 34
12.03. Expenses, Etc . . . . . . . . . . . . . . . . . 34
12.04. Amendments, Etc . . . . . . . . . . . . . . . . . 35
12.05. Successors and Assigns. . . . . . . . . . . . . 36
12.06. Assignments and Participations. . . . . . . . . 36
12.07. Survival. . . . . . . . . . . . . . . . . . 37
12.08. Captions. . . . . . . . . . . . . . . . . . . . 37
12.09. Counterparts. . . . . . . . . . . . . . . . . 37
12.10. Governing Law; Submission to Jurisdiction . . . 37
12.11. Waiver of Jury Trial. . . . . . . . . . . . . . . 37
12.12. No Third Party Beneficiaries. . . . . . . . . . 38
12.13. Entire Agreement. . . . . . . . . . . . . . . . 38
12.14. Severability. . . . . . . . . . . . . . . . . 38
SCHEDULE 8.02 - Subsidiaries
SCHEDULE 8.04 - Changes in Condition
SCHEDULE 8.06 - Litigation
SCHEDULE 8.09 - Defaults
SCHEDULE 8.10 - ERISA
SCHEDULE 8.11 - Foreign Trade Regulations; Government Regulations
SCHEDULE 8.12 - Outstanding Indebtedness
SCHEDULE 8.15 - Hazardous Materials
SCHEDULE
SCHEDULE 9.06 - Existing Liens
SCHEDULE 9.07 - Indebtedness
EXHIBIT A
- Form of
Section 9.01 Compliance Certificate
THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of
June 29, 1995, between: Concurrent Computer Corporation, a corporation duly
organized and validly existing under the law of the State of Delaware (the
Company ) as
borrower; Fleet Bank of Massachusetts, N.A. ( Fleet ) and CIBC Inc., a
corporation duly
organized and validly existing under the law of the State of Delaware ( CIBC )
as
lenders (individually, a Lender and, collectively, the Lenders ); and Fleet
as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the Agent ).
Recitals
A. The Company, the Lenders and the Agent are parties to a Second
Amended and Restated Credit Agreement dated as of July 21, 1993, as amended (the
1993 Credit Agreement ), which amended and restated an Amended and Restated
Credit Agreement dated as of October 11, 1991, as amended (the 1991 Credit
Agreement ).
B. The Company has advised the Lenders and the Agent that it wishes to
pay
in full the Terms Loans in connection with a comprehensive refinancing,
provided the
Lenders agree to extend the expiry dates of the Standby L/C s as hereinafter
defined.
C. This Agreement is intended to amend and restate the 1993 Credit
Agreement.
In exchange of the mutual covenants in this Agreement and
other good and valuable consideration, receipt of which is hereby
acknowledged, the Company, the Agent
and the Lenders hereby amend and restate the 1993 Credit Agreement in its
entirety as
follows, and agree to the following terms, conditions and provisions:
Section 1. Definitions and Accounting Matters.
1.01. Certain Defined Terms. As used herein, the following terms
shall have the
following meanings (all terms defined in this Section 1.01 or in other
provisions of this
Agreement in the singular to have the same meanings when used in the plural
and vice
versa):
Affiliate shall mean any Person which directly or indirectly controls,
or is under
common control with, or is controlled by, the Company. As used in this
definition,
control (including, with its correlative meanings, controlled by and
under common
control with ) shall mean possession, directly or indirectly, of power to
direct or cause the
direction of management or policies (whether through ownership of securities
or
partnership or other ownership interests, by contract or otherwise), provided
that, in any
event, any Person which owns directly or indirectly 5% or more of the
securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other
Person (other than as a limited partner of such other Person) will be deemed to
control
such corporation or other Person. Notwithstanding the foregoing, no individual
shall be
deemed to be an Affiliate solely by reason of his or her being a director,
officer or
employee of the Company or any of its Subsidiaries and the Company and its
Subsidiaries
shall not be deemed to be Affiliates of each other.
Amended Intercreditor Agreement shall mean the Amended and Restated
Intercreditor Agreement dated as of July 21, 1993 executed in connection with
the 1993
Credit Agreement, as the same shall be amended, modified and supplemented and in
effect from time to time.
Amended Security Agreement shall mean the Amended and Restated Security
Agreement dated as of October 11, 1991 executed in connection with the 1991
Credit
Agreement, as amended by First Amendment to Amended and Restated Security
Agreement dated as of June 30, 1993 and Second Amendment to Amended and Restated
Security Agreement dated as of July 21, 1993, as such Amended and Restated
Security
Agreement shall be further amended, modified and supplemented and in effect
from time
to time.
Banking Day shall mean any day on which commercial banks are not
authorized
or required to close in Boston, Massachusetts.
Basic Documents shall mean, collectively, this Agreement, the Standby
L/C s, the
Standby L/C Applications and the Security Documents.
Closing Date shall mean the date on which the conditions set forth in
Section 7
are satisfied and this Agreement becomes effective.
CNC shall mean Concurrent Nippon Corporation, a Japanese corporation.
Code shall mean the Internal Revenue Code of 1986, as amended from time
to
time.
Default shall mean an Event of Default or an event which with notice or
lapse of
time or both would become an Event of Default.
Disposition shall mean any sale, assignment, lease, transfer or other
disposition
of any Property (whether now owned or hereafter acquired) by the Company or any
of its
Subsidiaries to any Person excluding any sale, assignment, lease, transfer or
other
disposition of any Property sold, assigned, leased, transferred or otherwise
disposed of in
the ordinary course of business and on ordinary business terms, but excluding
in all
events any Equity Issuance.
Dollars and $ shall mean lawful money of the United States of America.
Domestic Subsidiary shall mean each Subsidiary of the Company that is
not a
Foreign Subsidiary.
Federal Funds Rate shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal
Reserve Bank of New York on the Banking Day next succeeding such day, provided
that
(i) if the day for which such rate is to be determined is not a Banking Day,
the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding
Banking Day as so published on the next succeeding Banking Day, and (ii) if
such rate is
not so published for any Banking Day, the Federal Funds Rate for such day
shall be the
rate on such day on such transactions as determined by the Agent.
Foothill shall mean Foothill Capital Corporation.
Foreign Subsidiary shall mean each Subsidiary of the Company not
organized
under the laws of the United States of America or any State thereof or that
conducts
substantially all of its business activities outside the United States.
GAAP shall mean generally accepted accounting principles as in effect
from time
to time, subject to the provisions of Section 1.02 hereof.
Guarantee shall mean a guarantee, an endorsement, a contingent
agreement to
purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or
become contingently liable under or with respect to, the Indebtedness, other
obligations,
net worth, working capital or earnings of any Person, or a guarantee of the
payment of
dividends or other distributions upon the stock or equity interests of any
Person, or an
agreement to purchase, sell or lease (as lessee or lessor) Property, products,
materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of
his, her or its obligations or an agreement to assure a creditor against loss,
and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit
or other similar instrument for the benefit of another Person, or any
obligation or
agreement to issue any of the foregoing, but excluding endorsements for
collection or
deposit in the ordinary course of business. The terms Guarantee and
Guaranteed
used as a verb shall have a correlative meaning.
Indebtedness shall mean, for any Person: all liabilities reflected on a
balance
sheet prepared in accordance with GAAP except for capital items including, but
not
limited to, (a) all indebtedness for trade obligations, (b) indebtedness
created, issued or
incurred by such Person for borrowed money (whether by loan or the
issuance and sale
of debt securities or the sale of Property to another Person subject to an
understanding
or agreement, contingent or otherwise, to repurchase such Property from such
Person);
(c) obligations of such Person to pay the deferred purchase or acquisition
price
of
Property or services; (d) indebtedness of others secured by a Lien on the
Property of
such Person, whether or not the respective indebtedness so secured has been
assumed by
such Person; (e) obligations of such Person in respect of letters of credit or
similar
instruments issued or accepted by banks and other financial institutions for the
account of
such Person; (f) Capital Lease Obligations of such Person (and excluding
obligations
under leases not required to be capitalized in accordance with GAAP); (g)
Indebtedness
of others Guaranteed by such Person; and (h) any Interest Rate Protection
Agreement to
which such Person is a party, the outstanding principal amount of which (or the
exposure with respect thereto) to be deemed for purposes of this Agreement
to be at
any time determined at such time in accordance with the standard methods of
calculating
such exposure under similar arrangements as prescribed from time to time by
the Agent
(or, if any Lender is a party to such Agreement, such Lender), taking into
account the
respective termination provisions set forth therein, the notional principal
amount and
term thereof and assuming that U.S. Treasury rates generally are equal to the
per annum
rate of interest which the Agent (or such Lender) at such time determines to be
the most
probable lowest U.S. Treasury rate to occur in the relevant period following
such date.
Lending Office shall mean, for each Lender, the Lending Office of
such
Lender (or of an affiliate of such Lender) designated on the signature pages
hereof or
such other office of such Lender (or of an affiliate of such Lender) as such
Lender may
from time to time specify to the Agent and the Company as the office by which
its Term
Loans are to be maintained.
Lien shall mean, with respect to any Property, any mortgage, lien,
pledge,
charge, security interest, option or right of first refusal or other encumbrance
of any kind
in respect of such Property. For purposes of this Agreement, the Company or
any of its
Subsidiaries shall be deemed to own subject to a Lien any Property which it
has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale
agreement, capital lease or other title retention agreement (other than an
operating
lease) relating to such Property.
Majority Lenders shall mean (a) if there are no outstanding L/C
Advances, Fleet
and CIBC, and (b) if there are outstanding L/C Advances, the Lender or
Lenders which
individually or in the aggregate holds or hold at least 67% of such
outstanding L/C
Advances. For purposes of clause (b) above, there shall be excluded any
outstanding L/C
Advances directly or indirectly held by the Company, any of its Subsidiaries
or any of
their respective Affiliates following an assignment or participation as
contemplated by
Section 12.06 hereof.
Margin Stock shall mean margin stock within the meaning of Regulations U
and X.
Material Adverse Effect shall mean a material adverse effect on (a)
the Property,
business, operations, financial condition, liabilities or capitalization of
the Company and
its Subsidiaries taken as a whole, (b) the ability of the Company to perform
its obligations
under any of the Basic Documents, (c) the validity or enforceability of any of
the Basic
Documents, (d) the rights and remedies of the Lenders and the Agent under
any of the
Basic Documents or (e) the timely payment of the principal of or interest
on the Term
Loans or other amounts payable in connection therewith.
Mortgage shall mean the Mortgage Security Agreement and Assignment of
Leases and Rents dated as of September 27, 1988 made by the Company covering the
respective properties and leasehold interests identified in Exhibit A thereto,
as amended
by a Mortgage Modification Agreement dated November 14, 1991 (as amended by
Assignment of Mortgage and First Amendment to Mortgage Modification Agreement
dated as of June 30, 1993) and Second Mortgage Modification Agreement dated
as of
July 21, 1993, as such Mortgage shall be further amended, modified and
supplemented
and in effect from time to time.
1991 Credit Agreement shall have the meaning assigned to such term in
Recital A hereof.
1994 Form 10-K shall have the meaning assigned to such term in Section
8.03(i)
hereof.
1993 Credit Agreement shall have the meaning assigned to such term in
Recital
A hereof.
Patent Assignment shall mean the Patent Assignment of Security
executed in
connection with the 1993 Credit Agreement, as amended, modified
and supplemented
and in effect from time to time.
PBGC shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Person shall mean any individual, corporation, company, voluntary
association,
partnership, joint venture, trust, unincorporated organization or government
(or any
agency, instrumentality or political subdivision thereof).
Pledge Agreements shall mean the Pledge Agreements executed in
connection
with the 1991 Credit Agreement, relating to the Company s pledge to the
Agent of all or
a portion of its ownership interest in the Foreign Subsidiaries for the
ratable benefit of
the Lenders to secure the Company s obligations under, among other
things, the 1991
Credit Agreement, as amended by First Amendment to Pledge Agreements
dated as of
June 30, 1993 and Second Amendment to Pledge Agreements dated as of
July 21, 1993,
as such Pledge Agreements shall be further amended, modified and supplemented
and in
effect from time to time.
Post-Default Rate shall mean a rate per annum equal to the Prime Rate
plus 4%
per annum.
Prime Rate shall mean the greater of (a) the rate of interest from
time to time
announced and made effective by the Agent as its Prime Rate , and (b) the
Federal
Funds Rate plus 1/2 of 1% per annum.
Property shall mean any right or interest in or to property of any
kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
Regulations U and X shall mean, respectively, Regulations U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the same
may
be amended or supplemented from time to time.
Security Documents shall mean, collectively, the Amended Security
Agreement,
the Pledge Agreements, the Mortgage, the Trademark Assignment, Patent
Assignment
and all Uniform Commercial Code financing statements required by this
Agreement to be
filed with respect to the security interests in personal Property and
fixtures created
thereunder.
Specified Event shall have the meaning assigned to such term in
Section 10
hereof.
Standby L/C Applications shall mean collectively each Application and
Agreement for Standby Letters of Credit executed by the Company on or about
November 12, 1993 in connection with the issuance of the Standby L/C s, as such
Applications shall be amended, modified and supplemented and in effect from time
to
time.
Standby L/C s shall mean the three standby letters of credit issued
pursuant to
the 1993 Credit Agreement by Fleet in favor of the Industrial Bank of Japan,
Limited,
The Sumitomo Bank, Limited and The Mitsubishi Bank, Limited in the respective
amounts of $1,800,000, $800,000 and $400,000, as amended by respective
amendments
dated June 22, 1995, as such letters of credit shall be further amended,
modified and
supplemented and in effect from time to time.
Subsidiary shall mean, for any Person, any corporation, partnership or
other
entity of which at least a majority of the securities or other ownership
interests having by
the terms thereof ordinary voting power to elect a majority of the board of
directors or
other persons performing similar functions of such corporation, partnership
or other
entity (irrespective of whether or not at the time securities or other
ownership interests of
any other class or classes of such corporation, partnership or other entity
shall have or
might have voting power by reason of the happening of any contingency) is at
the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
Wholly-Owned Subsidiary shall mean any such corporation, partnership or
other entity
of which all of such securities or other ownership interests (other than, in
the case of a
corporation, directors qualifying shares, minority interests issued to
satisfy statutory
requirements, or, in the case of the Subsidiaries listed on Schedule 8.02
hereto, shares
owned by The Perkin-Elmer Corporation if such shares do not exceed 2% of the
outstanding common stock of such Subsidiary), are so owned or controlled.
Term Loans shall mean the loans provided for by Sections 2.01 and 3.01
of the
1993 Credit Agreement.
Trademark Assignment shall mean the Trademark Assignment of Security
executed in connection with the 1993 Credit Agreement, as amended, modified and
supplemented and in effect from time to time.
1.02. Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms
used herein shall be interpreted, and all financial statements and certificates
and reports
as to financial matters required to be delivered to the Lenders hereunder shall
(unless
otherwise disclosed to the Lenders in writing at the time of delivery thereof in
the
manner described in subsection (b) below) be prepared, in accordance with
generally
accepted accounting principles applied on a basis consistent with those used in
the
preparation of the financial statements contained in the 1994 10-K. All
calculations made
for the purposes of determining compliance with the terms of the financial
covenants
contained in this Agreement shall (except as otherwise expressly provided
herein) be
made by application of generally accepted accounting principles applied on a
basis
consistent with those used in the preparation of the annual financial
statements furnished
to the Lenders pursuant to Section 9.01(b) hereof unless (i) the Company shall
have
objected to determining such compliance on such basis at the time of delivery
of such
financial statements or (ii) the Majority Lenders shall so object in writing
within 30 days
after delivery of such financial statements, in either of which events such
calculations
shall be made on a basis consistent with those used in the preparation of the
latest
annual financial statements as to which such objection shall not have been
made.
(b) The Company shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 9.01
hereof a
description in reasonable detail of any material variation between the
application of
accounting principles employed in the preparation of the next preceding annual
financial
statements as to which no objection has been made in accordance with the last
sentence
of subsection (a) above, and reasonable estimates of the difference between
such
statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9 hereof, the Company will not change
the last
day of its fiscal year from June 30 of each year, or the last days of the
first three fiscal
quarters in each of its fiscal years from September 30, December 31 and
March 31,
respectively.
1.03. Dollar Equivalents. As used in this Agreement, the Dollar
Equivalent of
any amount of foreign currency shall be (unless otherwise specified) the
amount of such
foreign currency converted to Dollars using the New York foreign exchange
selling rate
for such currency quoted in The Wall Street Journal for the date on which such
amount
was paid (or, if Indebtedness, incurred) or if such rate was not so quoted for
such date,
for the nearest preceding date for which such foreign exchange rate was so
quoted.
Section 2. Tinton Falls Fee and Restructuring Fee. Notwithstanding
the
amendment and restatement of the 1993 Credit Agreement (a) and the payment in
full of
the Term Loans, the obligations of the Company to pay a fee ( Tinton Falls Fee )
to
Fleet Bank and Barclays Bank PLC upon the sale of the Tinton Falls Facility
pursuant to
a certain letter agreement by and between the Company, Barclays Bank PLC and
Fleet
dated March 1, 1993, shall not be superseded hereby and shall continue in
effect as an
obligation of the Company, to be calculated in accordance with such letter, and
(b) the
obligations of the Company to pay the $50,000 balance of the amendment and
restructuring fee ($26,190 to Fleet and $23,810 to CIBC) pursuant to Amendment
No. 6
to Second Amended and Restated Credit Agreement between the Lenders and the
Company dated as of February 28, 1995 ( Restructuring Fee ), shall not be
superseded
hereby and shall continue in effect as an obligation of the Company, to be paid
in
accordance with such Amendment.
Section 3. The Standby L/C s; Several Obligations, Etc.
3.01 The Standby L/C s.
(a) The payment by Fleet of a draft drawn under any Standby L/C shall
constitute an L/C Advance. Upon written demand by Fleet to CIBC, CIBC shall
purchase from Fleet, and Fleet shall sell and assign to CIBC, a percentage of
such L/C
Advance equal to the product of the L/C Advance and CIBC's pro rata interest in
the
outstanding principal due under the Term Loans immediately prior to the
execution
hereof, by paying Fleet an amount equal to such product. The Company hereby
agrees
to any such sale and assignment. CIBC agrees to purchase its pro rata share
of any L/C
Advance on (a) the Banking Day on which demand therefor is made by Fleet,
provided
that notice of such demand is given not later than 1:00 p.m. (Boston time) on
such
Banking Day or (b) the first Banking Day next succeeding such demand if notice
of the
demand is given after such time and in each case such obligation shall be
absolute and
unconditional, notwithstanding the occurrence or continuation of a Default.
In the event
CIBC shall not have so purchased its pro rata share of an L/C Advance in a
timely
fashion, CIBC agrees to pay Fleet interest at the Federal Funds Rate on its pro
rata
share thereof for each day from the date of demand by Fleet until the date such
amount
is paid to Fleet.
(b) The Company shall pay to the Agent (for the account of Fleet and
CIBC in accordance with their respective pro rata interests in the Term Loans
held by
them immediately prior to the execution hereof) letter of credit fees as
follows: for the
period June 29, 1995 through June 30, 1996, a fee of three percent (3%) per
annum on
the aggregate of the face amounts of the Standby L/C s, payable in
equal quarterly payments on June 30, 1995, October 1, 1995,
January 1, 1996 and April 1, 1996; (ii) for the period
June 30, 1996 through June 30, 1997, a fee of four percent (4%)
per annum on the aggregate of the face amounts of the Standby L/C s
payable in equal quarterly
payments on July 1, 1996, October 1, 1996, January 1, 1997
and April 1, 1997; and(iii) for the period June 30, 1997 through June 30, 1998,
a fee of
five percent (5%) per annum on the aggregate face amounts of the
Standby L/C s, payable in equal quarterly
payments on July 1, 1997, October 1, 1997, January 1, 1998
and April 1, 1998.
(c) On the date of an L/C Advance, the Company shall repay Fleet
(for
its account and for the account of CIBC to the extent CIBC has purchased a pro
rata
share of such L/C Advance) the outstanding amount of such L/C Advance.
In the event
the Company fails to so repay Fleet on such date, until repayment of the
subject L/C
Advance, the Company shall pay to Fleet (for its account and for the account of
CIBC to
the extent CIBC has purchased a pro rata share of such Advance) interest on
such
amount at the Post-Default Rate.
(d) The expiry date of the Standby L/C s shall be
extended to August 1,1998. Fleet promptly shall execute and
deliver to the beneficiaries of the Standby L/C s,
and to the advising bank with respect thereto, appropriate amendments of the
Standby
L/C s reflecting such extension, and to the extent necessary, shall use
its best efforts to
obtain the consent of such beneficiaries to such amendments, and the
agreement of the
advising bank with respect thereto to continue to act in such capacity with
respect to such
Standby L/C s as so amended.
(e) Upon the occurrence of the Specified Event referenced in clause
(1) of Section 10, on demand, the Company shall forthwith deposit with the
Agent an
amount of cash equal to the undrawn amounts of the Standby L/C s. Such amount
shall
be deposited in a cash collateral account to be established by the Agent, for
the benefit
of the Lenders and shall constitute collateral security for all obligations of
the Borrower
relating to the Standby L/C s. All amounts in such cash collateral account
shall be
subject to the exclusive dominion and control (including exclusive rights of
withdrawal) of
the Agent over all such amounts and may be evidenced by a supplementing
agreement
satisfactory in form and substance to the Agent.
(f) The Company acknowledges and agrees that the Standby L/C
Applications are enforceable against it in all respects as if it were the
Customer under each such Application.
3.02. Several Obligations, Etc.
(a) The amounts payable by the Company at any time hereunder to
each Lender shall be a separate and independent debt and each Lender shall be
entitled
to protect and enforce its rights arising out of this Agreement, and it shall
not be
necessary for any other Lender or the Agent to consent to, or be joined as an
additional
party in, any proceedings for such purposes. Nothing in this Section shall
override or
otherwise modify the requirements for action under the Security Documents
provided for
in this Agreement or in the Security Documents.
(b) If any Lender (or receiver, liquidator or similar entity on its
behalf)
should default in any of its obligations hereunder to effectuate any required
sharing with
another Lender or to make any other payment to the Agent or another Lender, or
shall
repudiate or disaffirm (or purport to disaffirm) any of the foregoing
obligations, then
such defaulting Lender shall not be entitled to share in any payments,
prepayments or
other distributions under this Agreement or any Security Document, whether from
any
collateral or from the Company, the Agent or any Lender, until such time as
each other
Lender has received permanent payments or reductions in the L/C Advances held
by it
which, on a percentage basis, are equal to the reduction in the L/C Advances
achieved by
the defaulting Lender as a result of such default; provided, that nothing
herein shall in
any way limit any claims that the Company, the Agent or any Lender may have
against a
defaulting Lender arising out of any such default, all of which are hereby
expressly
reserved.
3.03. Intentionally Omitted.
3.04. Intentionally Omitted.
3.05. Intentionally Omitted.
Section 4. Intentionally Omitted.
Section 5. Payments; Pro Rata Treatment; Computations; Etc.
5.01. Payments.
(a) All payments to be made by the Company under this Agreement and
all payments to be made by the Company under any other Basic Document (except
as
otherwise specifically provided therein) shall be made in Dollars in
immediately available
funds without deduction, set-off or counterclaim (and the Company hereby
irrevocably
waives the right to interpose any non-compulsory counter claim in any
proceeding with
respect to the Company s obligations hereunder), not later than 1:00 p.m.
(Boston time)
on the date on which such payment shall become due (each such payment made
after
such time on such due date to be deemed to have been made on the next
succeeding
Banking Day).
(b) Any Lender for whose account any such payment is to be made, may
(but shall not be obligated to) debit the amount of any such payment which is
not made
by such time to any ordinary deposit account of the Company with such Lender
(with
notice thereof to the Company).
(c) If any payment is received by the Agent under this Agreement,
the
Agent shall promptly remit such payment to such Lender, in immediately
available funds.
(d) If the due date of any payment under this Agreement would
otherwise fall on a day which is not a Banking Day such date shall be
extended to the
next succeeding Banking Day and interest shall be payable for any principal so
extended
for the period of such extension.
5.02. Pro Rata Treatment. Except to the extent otherwise provided
herein, any
payment made in respect of the Standby L/C s (whether a repayment of an L/C
Advance,
the payment of interest thereon or the payment of the fees described in
Section 3.01(b))
by the Company shall be made for the account of the Lenders pro rata in
accordance
with their respective pro rata interests in the Term Loans held by them
immediately prior
to the execution hereof. The Lenders agree and acknowledge that immediately
prior to
the execution hereof, (a) Fleet held 52.38% of the Term Loans, and (b)
CIBC held
47.62% of the Term Loans.
5.03. Computations. Interest on amounts payable hereunder or under
the other
Basic Documents shall be computed on the basis of a year of 360 days, and
actual days
elapsed (including the first day but excluding the last day) occurring in the
period for
which payable. Any increase or decrease in the interest rate hereunder and
under the
other Basic Documents resulting from a change in the Prime Rate shall be
effective
immediately from the date of such change.
5.04. Intentionally Omitted.
5.05. Intentionally Omitted.
5.06. Intentionally Omitted.
5.07. Sharing of Payments, Etc.
(a) The Company agrees that, in addition to (and without limitation
of)
any right of set-off, banker s lien or counterclaim a Lender may otherwise
have, each
Lender shall be entitled, at its option, to offset balances held by it for
the account of the
Company at any of its offices or offices of its Affiliates, in Dollars or in
any other
currency, against any other amount payable to such Lender hereunder, that is
not paid
when due (regardless of whether such balances are then due to the Company), in
which
case it shall promptly notify the Company and the Agent thereof, provided that
such
Lender s failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from the Company payment of any
amount due under this Agreement or any other Basic Document through the
exercise of
any right of set-off, banker s lien or counterclaim or similar right or
otherwise (other than
from the Agent as provided herein), and, as a result of such payment, such
Lender shall
have received a greater percentage of any amount then due hereunder by the
Company
to such Lender than the percentage received by any other Lenders, it shall
promptly
purchase from such other Lenders Participations in (or, if and to the extent
specified by
such Lenders direct interests in) such other amount, respectively, owing to
such other
Lenders (or in interest due thereon, as the case may be) in such amounts, and
make such
other adjustments from time to time as shall be equitable, to the end that all
the Lenders
shall share the benefit of such excess payment (net of any expenses which may
be
incurred by such Lender in obtaining or preserving such excess payment) pro
rata in
accordance with such other amounts, respectively, owing to each of the
Lenders. To such
end all the Lenders shall make appropriate adjustments among themselves
(by the resale
of Participations sold or otherwise) if such payment is rescinded or must
otherwise be
restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker s
lien,
counterclaim or similar rights with respect to such participation as fully as
if such Lender
were a direct holder of amounts (as the case may be) owing to such Lender in
the
amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of
exercising, any such right with respect to any other indebtedness or obligation
of the
Company. If, under any applicable bankruptcy, insolvency or other similar law,
any
Lender receives a secured claim in lieu of a set-off to which this Section 5.07
applies,
such Lender shall, to the extent practicable, exercise its rights in respect of
such secured
claim in a manner consistent with the rights of the Lenders entitled under this
Section
5.07 to share in the benefits of any recovery on such secured claim.
Section 6. Yield Protection, Etc.
6.01. Additional Costs.
Anything herein to the contrary notwithstanding, if any changes in
present
or future applicable law (which term applicable law , as used in this Section
6.01,
includes statutes and rules and regulations thereunder and interpretations
thereof by any
competent court or by any governmental or other regulatory body or official
charged with
the administration or the interpretation thereof and requests, directives,
instructions and
notices at any time or from time to time heretofore or hereafter made upon or
otherwise
issued to any Lender by any central bank or other fiscal, monetary or other
authority),
including without limitation any change according to a prescribed schedule of
increasing
requirements, whether or not known or in effect as of the date hereof, shall (i)
subject
any Lender to any tax, levy, impost, duty, charge, fee, deduction or withholding
of any
nature with respect to this Agreement or the payment to such Lender of any
amounts
due to it hereunder, or (ii) materially change the basis of taxation of payments
to any
Lender of any other amounts payable to such Lender hereunder, or (iii) impose
or
increase or render applicable any special or supplemental deposit or reserve
or similar
requirements or assessment against assets held by, or deposits in or for the
account of, or
any liabilities of, or loans by an office of any Lender in respect of the
transactions
contemplated herein, or (iv) impose on any Lender any other condition or
requirement
with respect to this Agreement, and the result of any of the foregoing is cost
to (A) to
reduce any amount payable to such Lender hereunder, or (B) to require such
Lender to
make any payment or to forego any interest or other sum payable hereunder,
the amount
of which payment or foregone interest or other sum is calculated by reference
to the
gross amount of any sum receivable or deemed received by such Lender from
the
Company hereunder, then, and in each such case not otherwise provided for
hereunder,
the Company will upon demand made by such Lender promptly following such
Lender s
receipt of notice pertaining to such matters accompanied by calculations
thereof in
reasonable detail, pay to the Lender such additional amounts as will be
sufficient to
compensate it for such additional cost, reduction, payment or foregone
interest or other
sum; provided that the foregoing provisions of this sentence shall not apply in
the case of
any additional cost, reduction, payment or foregone interest or other sum
resulting from
any taxes charged upon or by reference to the overall net income, profits or
gains of such
Lender.
6.02. Intentionally Omitted.
Section 7. Conditions Precedent.
7.01. Conditions. This Agreement shall be effective upon receipt by
the Lenders
of the following documents and the fulfillment of the following conditions:
(a) Corporate Documents. The following documents, each certified as
indicated below:
(i) a copy of the charter, as amended, of the Company certified
by the Secretary of State of Delaware, and a certificate as to the good
standing of,
and charter documents filed by, the Company from such Secretary of State,
dated
as of a recent date; and
(ii) a certificate of the Secretary or an Assistant Secretary of
the
Company, dated the Closing Date and certifying (A) that attached thereto is
a true
and complete copy of the by-laws of the Company as in effect on the date of
such
certificate, (B) that attached thereto is a true and complete copy of
resolutions
duly adopted by the Board of Directors of the Company authorizing the
execution,
delivery and performance of such of the Basic Documents to which the
Company
is to be a party, and that such resolutions have not been modified,
rescinded or
amended and are in full force and effect, (C) that the charter of the
Company has
not been amended since the date of the certification thereto furnished
pursuant to
clause (i) above, and (D) as to the incumbency and specimen signature of
each
officer of the Company executing such of the Basic Documents to which
the
Company is intended to be a party and each other document to be delivered
by
the Company from time to time in connection therewith (and the Agent and
each
Lender may conclusively rely on such certificate until it receives notice
in writing
from such Person).
(b) Officer s Certificate. A Certificate of a senior officer of the
Company to the effect that no Default has occurred and is continuing.
(c) Opinion of General Counsel of the Company. An opinion of
Kevin J. Dell, Esq., Vice President, General Counsel and Secretary of the
Company, in
form and substance satisfactory to the Lenders.
(d) Intentionally Omitted.
(e) 1995 Security Agreement Amendment. An Amendment in form and
substance acceptable to the Company, the Agent and the Lenders to the Amended
Security Agreement, duly executed and delivered by the Company and the Agent,
and
evidence that the Company shall have taken such other action (including
delivering to the
Agent, for filing, appropriately completed and duly executed copies of
Uniform
Commercial Code financing statements) as the Agent shall have requested in order
to
perfect (or continue to perfect) the security interests created pursuant to the
Amended
Security Agreement.
(f) 1995 Mortgage Modification and Title Insurance. An Amendment
in form and substance acceptable to the Company, the Agent and the Lenders to
the
Mortgage duly executed and delivered by the Company and the Agent in recordable
form
(the 1995 Mortgage Modification ) in such number of duplicate originals as the
Agent
shall have requested and the 1995 Mortgage Modification shall have been duly
recorded
(or the Agent shall have received satisfactory title insurance against any
intervening
encumbrance as provided in the following sentence). The 1995 Mortgage
Modification
shall be accompanied by an updating of the existing policy of title insurance
(or by issuing
a new policy of title insurance) on forms of and issued by one or more title
companies
satisfactory to each Lender (the Title Companies ), insuring the priority of
the Liens
created under the Mortgage for an amount satisfactory to each Lender, subject
only to
such exceptions as are satisfactory to each Lender and, to the extent necessary
under
applicable law, for filing in the appropriate county land office, Uniform
Commercial
Code financing statements covering fixtures, in each case appropriately
completed and
duly executed and evidence that the Company shall have paid to the Title
Companies all
expenses and premiums of the Title Companies in connection with the issuance of
such
policies and in addition shall have paid to the Title Companies an amount equal
to the
recording and stamp taxes payable in connection with recording the Mortgage in
the
appropriate county land office.
(g) 1995 Pledge Agreement Amendments. An Amendment in form and
substance acceptable to the Company, the Agent and the Lenders to the Pledge
Agreements, duly executed and delivered by the Company and the Agent.
(h) Intentionally Omitted.
(i) Intentionally Omitted.
(j) Intentionally Omitted.
(k) Intentionally Omitted.
(l) Intentionally Omitted.
(m) Intentionally Omitted.
(n) Intentionally Omitted.
(o) Other Documents. Such other documents as the Agent or any
Lender or counsel to the Lenders may reasonably request.
(p) Extension of Expiry Dates of Standby L/C s. All documents or
agreements requested by Fleet which are necessary to effect the extension of
the expiry
dates of the Standby L/C s, duly executed by the Company and Fleet.
(q) Closing Expenses. The Company shall have paid the reasonable
fees
and expenses of Goodwin, Procter & Hoar, as special counsel to the Lenders, in
connection with the negotiation, preparation, execution and delivery of this
Agreement.
(r) Payment of Term Loans and Restructuring Fee. The Company shall
have paid in full the Term Loans and the Restructuring Fee. The Company hereby
consents to Fleet debting the Company s demand deposit account at Fleet to
effect the
Company s pro rata payment to Fleet of the Restructuring Fee and the Standby
L/C fee
due on June 30, 1995.
7.02. Intentionally Omitted.
Section 8. Representations and Warranties. The Company hereby
represents
and warrants to the Lenders that:
8.01. Corporate Organization and Existence. Each of the Company and
its
Subsidiaries is a corporation duly organized and validly existing and in good
standing
under the laws of the jurisdiction in which it is incorporated and has all
necessary
corporate power to own its assets and to carry on the business now conducted or
as
proposed to be conducted by it. The Company has all necessary corporate
power and has
taken all corporate action required to make all the provisions of this
Agreement and the
other Basic Documents and the agreements and instruments executed in connection
therewith, the valid and enforceable obligations they purport to be, subject to
bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
applicability
affecting the enforcement of creditors rights and the application of
general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity
or at law). Each of the Company and its Subsidiaries is duly qualified and in
good
standing as a foreign corporation in all jurisdictions in which the nature of
its business or
the character of the property owned by it makes such qualification necessary
and where
the failure to so qualify could have a Material Adverse Effect, and is duly
authorized,
qualified and licensed under all laws, regulations, ordinances or orders of
public
authorities, or otherwise, to own its assets and to carry on its business in
the places and
in the manner presently conducted or as proposed to be conducted.
8.02. Subsidiaries. As of the Closing Date, the Company has only the
Subsidiaries (and the Investments by it or any of its Subsidiaries in any Joint
Venture or
other Person) set forth in Schedule 8.02 hereto, all of the outstanding
capital stock of
each such Subsidiary is duly authorized, validly issued, fully paid and
non-assessable
(subject to no security interests or restrictions on transfer other than those
(a) arising
under the Basic Documents, if any, (b) contained in the charter documents of
the
respective Subsidiaries, (c) under applicable securities laws, or (d) expressly
permitted
hereby) and owned as set forth in said Schedule, and the Company (or the
respective
Subsidiary) also owns, free and clear of Liens, all such Investments. Said
Schedule also
identifies those Subsidiaries which are Consolidated Subsidiaries.
8.03. Financial Information. The Company has previously furnished
each of the
Lenders copies of the following:
(i) the Company s annual report on Form 10-K relating to the
Company s fiscal year ended June 30, 1994 in the form filed with the
Securities
and Exchange Commission (the 1994 Form 10-K ); and
(ii) the Company s quarterly report on Form 10-Q relating to the
Company s fiscal quarter ended March 31, 1995 in the form filed with the
Securities and Exchange Commission (together with the 1994 Form 10-K, the
SEC Reports ).
Each of the SEC Reports (including all of the financial statements included
therein)
contains all information which is required to be stated therein in accordance
with
applicable federal securities laws, rules and regulations and conforms in all
material
respects to the requirements thereof; the financial statements contained in the
SEC
Reports were prepared in accordance with generally accepted accounting
principles,
consistently applied, and present fairly the financial condition of the
corporations stated
to be covered thereby at the dates thereof and the results of their operations
for the
stated periods covered thereby; and none of the SEC Reports at the date
thereof
included any untrue statement of a material fact or omitted to state a material
fact
required to be stated therein or necessary to make the statements therein in
the light of
the circumstances under which they were made not misleading, subject, in the
case of the
report on Form 10-Q, to normal year-end adjustments.
8.04. Changes in Condition. Except as disclosed in Schedule 8.04
hereto, (i)
since March 31, 1995, there has been no material adverse change in the business
or assets
or in the condition, financial or otherwise, of the Company and its
Subsidiaries, taken as
a whole; and (ii) the Company and its Subsidiaries on a consolidated basis have
no
known contingent liabilities for taxes, unusual forward or long-term
commitments or
unrealized or anticipated losses from any unfavorable commitments of any
material
amount which are not referred to in the SEC Reports.
8.05. Assets. The Company and its Subsidiaries have good and
marketable title
to all assets carried on their books and reflected in the financial statements,
notes and
schedules thereto contained in the SEC Reports, subject to no other ownership
interests
or any liens, charges or encumbrances, except for liens, charges and
encumbrances
permitted by Section 9.06 hereof and assets sold, abandoned or otherwise
disposed of in
the ordinary course of business.
8.06. Litigation. Except as to matters referred to in Schedule 8.06
hereto, there
are no legal or arbitral proceedings, at law or in equity, or any proceeding
before any
federal, state, provincial or municipal board or other governmental or
administrative
agency pending or to the knowledge of the Company threatened in writing against
the
Company or any of its Subsidiaries which involves a material risk of any
judgment or
liability not fully covered by insurance which may have a Material Adverse
Effect, and no
judgment, decree, or order of any federal, state, provincial or municipal
court, board or
other governmental or administrative agency has been issued against the
Company or any
Subsidiary which has, or will have, a Material Adverse Effect.
8.07. Tax Returns. The Company and each of its Subsidiaries have
filed all tax
returns which are required to be filed by them and have paid, or made
adequate
provision for the payment of, all significant taxes which have or may become
due
pursuant to said returns or to assessments received. United States Federal
income tax
returns of the Company and its Subsidiaries have been examined and closed
through the
fiscal year of the Company ended June 30, 1987. The Company and its
Subsidiaries have
made adequate provisions for all current taxes, and in the opinion of the
Company there
will not be any additional assessments for any fiscal periods prior to and
including that
which ended the dates of said balance sheets in excess of the amounts reserved
therefor.
If the Company is a member of an affiliated group of corporations filing
consolidated
returns for United States Federal income tax purposes, it is the common parent
of such
group.
8.08. No Legal Obstacle to Agreement. None of the execution and
delivery of
this Agreement and the other Basic Documents, nor the consummation of any
transaction
herein referred to or contemplated hereby nor the fulfillment of the terms
hereof or of
any agreement or instrument referred to in this Agreement has constituted or
resulted in
or will constitute or result in a breach of the provisions of any contract to
which the
Company or any Subsidiary is a party or by which it is bound or of the charter
or by-laws
of the Company or any Subsidiary or the violation of any presently existing
applicable
law, judgment, decree, federal, provincial or state law or governmental order,
rule or
regulation, or result in the creation under any agreement or instrument of any
Lien upon
any of the assets of the Company or any of its Subsidiaries, except as
permitted by
Section 9.06 hereof.
8.09. Defaults. Except as set forth in Schedule 8.09 hereto, neither
the Company
nor any of its Subsidiaries is in default under any provision of its charter or
by-laws or
any other agreement or other instrument to which it is a party or by which it
is bound or
is in violation of any federal or state law, governmental order, rule or
regulation except,
in any such case, for any of the foregoing that do not, in the aggregate,
have a Material
Adverse Effect.
8.10. ERISA. The Company and each member of the Company s controlled
group (within the meaning of Section 302(d)(8)(c) of ERISA have fulfilled their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each plan subject to such standards, and there has been no
application
filed for a waiver of such requirements with respect to any such plan.
No event has
occurred which would cause the Company or any ERISA Affiliate to incur,
directly or
indirectly (through indemnification or otherwise) material liability or
penalties under
ERISA or the provisions of the Code relating to employee benefit programs,
including
(without limitation) Sections 409, 502(i) or 502(l) of ERISA, title IV of
ERISA, or
section 4975 or 4980B of the Code. Except as set forth in Schedule
8.10 hereto, neither
the Company nor any ERISA Affiliate provided (or has promised to provide)
medical or
other welfare benefits (or coverage with respect to such benefits) for periods
beyond the
date of any employee s termination of employment with the Company or such
ERISA
Affiliate (a Post-Termination Welfare Arrangement ), except to the extent
required by
part 6 of subtitle B of title I of ERISA and at the sole expense of the
employee (or his
beneficiary). None of the Plans has any unfunded benefit liabilities within
the meaning
of Section 4001(a)(18) of ERISA. Neither the Company nor any ERISA Affiliate
contributes to (or has an obligation to contribute to) a Multiemployer Plan.
The
Company and the ERISA Affiliates have the authority unilaterally to terminate
(or to
terminate their participation in) without notice each employee benefit program
or
arrangement they maintain or contribute to (or each vehicle that funds
obligations under
such program or arrangement) without incurring additional liability with
respect to such
program or arrangement.
8.11. Foreign Trade Regulations; Government Regulation.
(a) Foreign Trade Regulations. Neither the Company nor any
Subsidiary of the Company is: (i) a person included within the definition of
designated
foreign country or national of a designated foreign country in Executive
Order No.
8389, as amended, in Executive Order No. 9193, as amended, in the Foreign
Assets
Control Regulations (31 C.F.R., Chapter V, Part 500, as amended), in the Cuban
Assets
Control Regulations of the United States Treasury Department (31 C.F.R.,
Chapter
v,
Part 515, as amended) or in the Regulations of the Office of Alien Property,
Department
of Justice (8 C.F.R., Chapter II, Part 507, as amended) or within the meanings
of any of
the said Orders or Regulations or of any regulations, interpretations or rulings
issued
thereunder, or in violation of said Orders or Regulations or of any
regulations,
interpretations or rulings issued thereunder; or (ii) an entity listed in
Section 520.101 of
the Foreign Funds Control Regulations (31 C.F.R., Chapter V, Part 520, as
amended).
(b) Government Regulation. Except as set forth on Schedule 8.11
hereto, neither the Company nor any Subsidiary nor any corporation controlling
the
Company or under common control with the Company is subject to regulation under
the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment
Company Act of 1940, the Interstate Commerce Act, or to any statute or
regulation
regulating the incurring by the Company of Indebted for money borrowed, or to
any
statute or regulation relating to common or contract carriers or to the sale of
electricity,
gas, steam, water or other public utility services. No approval or
authorization of any
governmental authority is required to permit the execution, delivery or
performance by
the Company of this Agreement or any other Basic Document or the consummation
of
any of the transactions contemplated hereby or thereby.
8.12. Outstanding Indebtedness. The outstanding Indebtedness in
respect of
borrowed money and Capital Lease Obligations of the Company and its
Subsidiaries at
March 31, 1995, is correctly set forth in Schedule 8.12 hereto, and said
Schedule correctly
describes all security interests securing such Indebtedness.
8.13. Disclosure. Neither this Agreement nor any written agreement,
document,
certificate or statement furnished to any of the Lenders or the Agent by or on
behalf of
the Company in connection with the transactions contemplated hereby contains
any
untrue statement of material fact or omits to state a material fact necessary
in order to
make the statements contained herein or therein not misleading.
8.14. Intentionally Omitted.
8.15. Hazardous Materials. Except as set forth in Schedule 8.15
hereto, the
Company and each of its Subsidiaries have obtained all permits, licenses and
other
authorizations, and have filed all notifications and registrations, which are
required under
all Environmental Laws, except to the extent failure to have any such permit,
license or
authorization or to file such notification or registration would not have a
Material
Adverse Effect. The Company and each of its Subsidiaries are in compliance
with
the
terms and conditions of all such permits, licenses and authorizations, and are
also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions,
requirements, obligations, schedules and timetables contained in any
applicable
Environmental Law or in any regulation, code, plan, order, decree,
judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to
the extent failure to comply would not have a Material Adverse Effect.
In addition, except as set forth in Schedule 8.15 hereto:
(a) No notice, notification, demand, request for information,
citation,
summons or order has been issued, no complaint has been filed, no penalty has
been
assessed and no investigation or review is pending or threatened by any
governmental
agency or other Person with respect to any alleged failure by the Company or
any of its
Subsidiaries to have any permit, license or authorization, or to file any
notification or
registration, required in connection with the conduct of the business of the
Company or
any of its Subsidiaries or with respect to any generation, treatment, storage,
recycling,
transportation, discharge or disposal, or any Release of any Hazardous
Materials
generated by the Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries or Environmental
Affiliates has handled any Hazardous Material on any Property now or previously
owned
or leased by the Company or any of its Subsidiaries or Environmental Affiliates
to an
extent that it has, or may reasonably be expected to have, a Material Adverse
Effect; and
(i) no PCB or asbestos is or has been present at any Property
now or previously owned or leased by the Company or any of its
Subsidiaries or
Environmental Affiliates;
(ii) there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any Property now or previously owned or
leased
by the Company or any of its Subsidiaries or Environmental Affiliates;
(iii) no Hazardous Materials have been Released, in a
reportable
quantity, where a report is required by statute, ordinance, rule,
regulation or
order, or otherwise, at, on or under any Property now or previously
owned by the
Company or any of its Subsidiaries or Environmental Affiliates that is
likely to
involve an expenditure in excess of $500,000.
(c) Neither the Company nor any of its Subsidiaries or Environmental
Affiliates has transported or arranged for the disposal or transportation of
any Hazardous
Material at or to any location which is listed on the National Priorities List
under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as
amended ( CERCLA ), listed for possible inclusion on the National Priorities
List by the
Environmental Protection Agency in CERCLIS or on any similar state list or
which is the
subject of Federal, state or local enforcement actions or other investigations
which may
lead to claims against the Company or any of its Subsidiaries for clean-up
costs, remedial
work, damages to natural resources or for personal injury claims, including,
but not
limited to, claims under CERCLA.
(d) No Hazardous Material generated by the Company or any of its
Environmental Affiliates has been recycled, treated, stored, disposed of, or
Released by
the Company or any of its Environmental Affiliates at any location other than
those listed
in Schedule 8.15 hereto.
(e) No oral or written notification of a Release of a Hazardous
Material
has been filed by or on behalf of the Company or any of its Subsidiaries and
no Property
now or previously owned, leased or otherwise used by the Company or any of
its
Subsidiaries is listed or proposed for listing on the National Priorities
List promulgated
pursuant to CERCLA, on CERCLIS or on any similar state list of sites
potentially
requiring investigation or clean-up.
(f) No Liens have arisen under or pursuant to any Environmental Laws
on any of the real Property or Properties owned or leased by the Company or any
of its
Subsidiaries, and no government actions have been taken or are in process which
could
subject any of such Properties to such Liens and neither the Company nor any of
its
Subsidiaries would be required to place any notice or restriction relating to
the presence
of Hazardous Materials at any Property owned by it in any deed to such Property.
(g) There have been no environmental investigations, studies,
audits,
tests, reviews or other analyses conducted by or which are in the possession of
the
Company or any of its Subsidiaries in relation to any Property or facility now
or
previously owned or leased by the Company or any of its Subsidiaries which have
not
been made available to the Lenders.
8.16. Security Documents. As of the Closing Date, (a) the security
interest
granted to the Agent pursuant to the Amended Security Agreement constitutes
a
perfected security interest in all of the personal property of the Company
(other than
(i) personal property not included in Collateral , as defined in such
Agreement, and
(ii) personal property of the Company located in Idaho, Iowa, Kansas, Maryland,
North
Dakota, Oregon, Puerto Rico and Virginia) which may be perfected by the filing
of a
Uniform Commercial Code financing statement, including without limitation,
accounts,
inventory, equipment and general intangibles, subject only to the Liens
permitted by
Section 9.06, (b) pursuant to the Mortgage, the Agent has an enforceable
mortgage on
the real property (and improvements thereon and fixtures thereat) owned by
the
Company and located in Tinton Falls and Oceanport, New Jersey, subject only to
the
Liens of Foothill, (c) pursuant to the Pledge Agreements and the instruments
of transfer
executed in connection therewith, the Agent has a perfected security interest
in the
Pledged Stock , as defined in each such Agreement, subject only to the Lien of
Foothill,
and (d) the foregoing security interests and Mortgage secure any and all
obligations of
the Company to the Lenders and/or Agent now existing or hereafter arising,
hereunder
and under the other Basic Documents, including the obligations of the Company,
related
to, arising, from or in connection with the Standby L/C s, the L/C Advances and
the
Standby L/C Applications. The representations and warranties in the
Security
Documents, to the extent applicable, are amended to reflect that such
security interests
and Mortgage are subject to the Liens of Foothill pursuant to an
Intercreditor
Agreement between Foothill and the Agent dated as of June 29, 1995.
Section 9. Covenants of the Company. The Company covenants and agrees
with the Lenders and the Agent that, so long as any Standby L/C or any
reimbursement
obligation with respect to any Standby L/C is outstanding:
9.01. Financial Statements. The Company shall deliver to each of
the Lenders
and the Agent:
(a) as soon as available and in any event within 50 days after the
end of
each quarterly fiscal period of each fiscal year of the Company, consolidated
and
consolidating statements of income and consolidated statements of cash flow of
the
Company and its Consolidated Subsidiaries for such period and for the period
from the
beginning of the respective fiscal year to the end of such period, and the
related
consolidated and consolidating balance sheets as at the end of such period,
setting forth
in the case of the consolidated statements in comparative form the
corresponding
consolidated figures for the corresponding period in the preceding financial
year,
accompanied by a certificate of a senior financial officer of the Company,
which
certificate shall state that said consolidated financial statements fairly
present the
consolidated financial condition and results of operations of the Company and
its
Consolidated Subsidiaries, in accordance with generally accepted accounting
principles,
consistently applied, as at the end of, and for, such period (subject to normal
year-end
audit adjustments), and that said consolidating financial statements were
prepared by the
Company in good faith on the basis of the books and records of the Company and
its
Subsidiaries and were the consolidating financial statements used in preparing
said
consolidated financial statements;
(b) as soon as available and in any event within 100 days after the
end
of each fiscal year of the Company, consolidated and consolidating statements
of income
and consolidated statements of cash flow of the Company and its Consolidated
Subsidiaries for such year and the related consolidated and consolidating
balance sheets
as at the end of such year, setting forth in the case of the consolidated
statements in
comparative form the corresponding consolidated figures for the preceding
fiscal year,
and accompanied (i) in the case of said consolidated statements and balance
sheet, by an
opinion thereon of independent certified public accountants of recognized
national
standing, which opinion shall state that said consolidated financial
statements fairly
present the consolidated financial condition and results of operations of the
Company
and its Consolidated Subsidiaries as at the end of, and for, such fiscal year
in accordance
with generally accepted accounting principles, and a certificate of such
accountants stating
that, in making the examination necessary for their opinion, they obtained no
knowledge,
except as specifically stated, of any Default, and (ii) in the case of said
consolidating
statements and balance sheets, by a certificate of a senior financial officer of
the
Company, which certificate shall state that said consolidating financial
statements were
prepared by the Company in good faith on the basis of the books and records of
the
Company and its Subsidiaries and were the consolidating financial statements
used in
preparing said consolidated financial statements;
(c) promptly upon their becoming available, copies of all
registration
statements and regular periodic reports, if any, which the Company shall have
filed with
the Securities and Exchange Commission (or any governmental agency
substituted
therefor) or any national securities exchange; provided that notwithstanding
the
foregoing, (i) the Company shall deliver to each of the Lenders the Form 10-K
for such
fiscal year filed with the Securities and Exchange Commission within one Banking
Day of
the date such Form 10-K has been so filed; and (ii) within 60 days of each
fiscal quarterend of the Company, the Company shall deliver to each of the
Lenders the Form 10-Q
for such fiscal quarter filed with the Securities and Exchange Commission;
(d) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so
mailed;
(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified
below have occurred or exist, a statement signed by a senior financial officer
of the
Company setting forth details respecting such event or condition and the
action, if any,
which the Company or its ERISA Affiliate proposes to take with respect thereto
(and a
copy of any report or notice required to be filed with or given to PBGC by the
Company
or an ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC
has not by regulation waived the requirement of Section 4043(a) of ERISA
that it
be notified within 30 days of the occurrence of such event;
(ii) the failure of any plan subject to Section 302 of ERISA and
which is maintained by the Company (or any member of the Company s
controlled group within the meaning of Section 302(d)(8)(C) of ERISA) to
satisfy any of the requirements of Section 302 of ERISA, or the filing of
an
application for a waiver of minimum funding with respect to any such plan;
(iii) the filing under Section 4041 of ERISA of a notice of
intent
to terminate any Plan or the termination of any Plan;
(iv) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any
Plan, or the receipt by the Company or any ERISA Affiliate of a notice
from a
Multiemployer Plan that such action has been taken by PBGC with respect
to such
Multiemployer Plan;
(v) the complete or partial withdrawal by the Company or any
ERISA Affiliate under Section 4203 or 4205 of ERISA from a Multiemployer
Plan, or the receipt by the Company or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section
4241 or 4245 of ERISA or that it intends to terminate or has terminated
under
Section 4041A of ERISA;
(vi) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
and
(vii) any event (including receipt of a notice from the
Internal
Revenue Service) indicating that any plan maintained by the Company and
intended to be qualified under Section 401(a) of the Internal Revenue Code
is not
so qualified.
(f) as soon as available and in any event within 15 days after
receipt,
any income statements, cash flow statements, balance sheets or other financial
statements
of CNC;
(g) within 15 Banking Days after receipt, a copy of all material
audit
reports and letters to management submitted to the Company by independent
public
accountants in connection with any annual, special or interim audits of the
books of the
Company, except to the extent that the delivery thereof would result in the
waiver of any
privilege claim to which the Company would otherwise be entitled;
(h) within five Banking Days after the Company knows or has reason to
believe that any Default has occurred, a notice of such Default describing the
same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a
description of the action that the Company has taken and proposes to take with
respect
thereto;
(i) from time to time, such other information regarding the
financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries as
the Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial
statements pursuant to paragraph (a) or (b) above, a Compliance Certificate of
the
Company signed by an authorized officer substantially in the form of Exhibit A
hereto to
the effect that, among other things, no Default has occurred and is continuing
(or, if any
Default has occurred and is continuing, describing the same in reasonable detail
and
describing the action that the Company has taken and proposes to take with
respect
thereto).
9.02. Intentionally Omitted.
9.03. Existence. The Company will, and will cause each of its
Subsidiaries to:
preserve and maintain its legal existence and all of its material rights,
privileges and
franchises (except as a result of any transaction permitted by Section 9.05
hereof or the
dissolution (or other reorganization or restructuring) of any Foreign Subsidiary
to the
extent done as part of present or future cost-saving efforts, and except for the
dissolution
(or other reorganization or restructuring) of CNC); comply with the requirements
of all
applicable laws, rules, regulations and orders of governmental or regulatory
authorities if
failure to comply with such requirements would have a Material Adverse
Effect.
9.04. Insurance. The Company will, and will cause each of its
Subsidiaries to,
keep insured by financially sound and reputable insurers all Property of a
character
usually insured by corporations engaged in the same or similar business
similarly situated
against loss or damage of the kinds and in the amounts customarily insured
against by
such corporations and carry such other insurance as is usually carried by
such
corporations.
9.05. Prohibition of Fundamental Changes. The Company will not, nor
will it
permit any of its Subsidiaries to, enter into any transaction of merger or
consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or
dissolution) except, in the case of any Foreign Subsidiary or inoperative
Subsidiary, as
permitted by Section 9.03 or as directed by the Board of Directors of the
Company in
connection with any rationalization of the legal structure of the Company s
foreign
operations so long as such rationalization does not have material adverse tax
consequence
to the Company or result in any material cost to the Company. The Company will
not,
and will not permit any of its Domestic Subsidiaries to, convey, sell, lease,
transfer or
otherwise dispose of, in one transaction or a series of transactions, all or a
substantial
part of its business or Property, whether now owned or hereafter acquired
(including,
without limitation, receivables and leasehold interests, but excluding
Dispositions
permitted by Section 9.24 hereof). Notwithstanding the foregoing provisions of
this
Section 9.05:
(a) any Domestic Subsidiary of the Company may be merged or
consolidated with or into the Company or any Wholly-Owned Domestic Subsidiary or
Subsidiaries of the Company if the Company or such Wholly-Owned Domestic
Subsidiary
or Subsidiaries shall be the continuing or surviving corporation or
corporations, provided
that in no event may any Subsidiary that is acquired after the Closing Date as
permitted
by paragraph (c) below be party to a merger or consolidation with the Company or
any
other Subsidiary of the Company;
(b) any such Subsidiary may sell, lease, transfer or otherwise
dispose of
any or all of its Property (upon voluntary liquidation or otherwise) to the
Company or to
one or more Wholly-Owned Subsidiaries of the Company;
(c) the Company or any of its Domestic Subsidiaries may acquire the
capital stock of any Person if it acquires all (or all not already owned by it)
of the capital
stock of such Person and the sole consideration for such acquisition is capital
stock of the
Company or, to the extent permitted by clauses (a) and (b) of Section 9.16
hereof, of any
Subsidiary; and, after giving effect thereto, no Default has occurred and is
continuing and
so long as neither the Company nor any of its Domestic Subsidiaries shall
assume,
Guarantee or otherwise in any manner become liable with respect to the
Indebtedness of
such Person, unless such liability of the Company or its Domestic Subsidiary
would
constitute Indebtedness permitted by Section 9.07 hereof;
(d) the Company or any of its Domestic Subsidiaries may acquire
Property (including services) from another Person in exchange for capital stock
of the
Company or, to the extent permitted by clauses (a) and (b) of Section 9.16
hereof, of any
Subsidiary; and
(e) the Company or any of its Subsidiaries may acquire the
investment
of Nippon Steel Corporation in CNC.
Nothing in this Section 9.05 shall prohibit any transaction permitted by Section
9.24
hereof.
9.06. Limitation on Liens. The Company will not, nor will it permit
any of its
Domestic Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its
Property, whether now owned or hereafter acquired, except:
(a) Liens in favor of Foothill;
(b) Liens created pursuant to the Security Documents;
(c) Existing Liens described in Schedule 9.06 hereto;
(d) Liens imposed by any governmental authority for taxes,
assessments
or charges or with respect to obligations under Environmental Laws that are not
yet due
or which are being contested in good faith and by appropriate proceedings if
adequate
reserves with respect thereto are maintained on the books of the Company or any
of its
Subsidiaries, as the case may be, if required in accordance with GAAP;
(e) carriers , warehouseman s, mechanics , materialmen s,
repairmen s or
other like Liens arising in the ordinary course of business which are not
overdue for a
period of more than 30 days or which are being contested in good faith and
by
appropriate proceedings and Liens securing judgments but only to the extent for
an
amount and for a period not resulting in a Specified Event or an Event of
Default under
Section 10(h) hereof;
(f) pledges or deposits under worker s compensation; unemployment
insurance and other social security legislation;
(g) deposits to secure the performance of bids, trade contracts
(other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds,
performance bonds, payment of porting fees for modifications of third-party
software to
run on the Company s hardware platforms and other obligations of a like nature
incurred
in the ordinary course of business;
(h) easements, rights-of-way, restrictions and other similar
encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning
restrictions easements, licenses, restrictions on the use of Property or minor
imperfections
in title thereto which, in the aggregate, are not material in amount, and which
do not in
any case materially detract from the value of the Property subject thereto or
interfere
with the ordinary conduct of the business of the Company or any of its
Subsidiaries;
(i) Liens upon real and/or tangible personal Property acquired after
the
date hereof (by purchase, construction or otherwise) by the Company or any of
its
Domestic Subsidiaries, each of which Liens either (A) existed on such Property
before
the time of its acquisition and was not created in anticipation thereof, or (B)
was created
solely for the purpose of securing Indebtedness representing, or incurred to
finance,
refinance or refund, the cost (including the cost of construction) of such
Property;
provided that no such Lien shall extend to or cover any Property of the Company
or such
Subsidiary other than the Property so acquired and improvements thereon; and
provided,
further, that the principal amount of Indebtedness secured by any such Lien
shall at no
time exceed 90% of the Market Value (as determined in good faith by a senior
financial
officer of the Company) of such real Property and 90% of the book value of
such
tangible personal Property at the time it was acquired (by purchase,
construction or
otherwise);
(j) title retention provisions or similar Liens in favor of a
vendor of
goods to the Company so long as such Liens arise in the ordinary course of
business
provided that the holder of such Lien has not filed financing statements,
given notice to
the Lenders of a purchase money security interest or otherwise taken steps to
perfect
such Lien;
(k) Liens arising from capital leases to the extent the Capital Lease
Obligations arising therefrom are permitted by Section 9.20(a) hereof.
(l) any extension, renewal or replacement of the foregoing, provided,
however, that the Liens permitted hereunder shall not be spread to cover any
additional
Indebtedness or Property (other than a substitution of like Property); and
9.07. Indebtedness. The Company will not, and will not permit any of
its
Domestic Subsidiaries to, create, incur or suffer to exist any Indebtedness
except:
(a) Indebtedness to Foothill for borrowed money in an amount not
exceed $21,000,000 in the aggregate at any one time and other Indebtedness to
Foothill;
(b) indebtedness to the Lenders hereunder;
(c) trade account payables of the Company incurred in the ordinary
course of business;
(d) other Indebtedness outstanding on the date hereof and listed in
Schedule 9.07 hereto and any refinancing thereof;
(e) Guarantees by the Company and the Domestic Subsidiaries of
obligations of Foreign Subsidiaries in an aggregate amount not exceeding
$15,000,000 at
any one time outstanding;
(f) Indebtedness of the Company to its Foreign Subsidiaries (so long
as
such Indebtedness shall not have been pledged to any creditor of any Foreign
Subsidiary
or any other Person);
(g) Indebtedness of the Company and its Domestic Subsidiaries
permitted under Section 9.06(h) hereof up to but not exceeding $5,000,000 at any
one
time outstanding;
(h) Indebtedness of the Company and its Domestic Subsidiaries
incurred
to finance investments permitted by Section 9.08(f) hereof not exceeding
$15,000,000 at
any one time outstanding which Indebtedness may be secured by Liens permitted
under
Section 9.06(h);
(i) Capital Lease Obligations permitted under Section 9.20 hereof;
(j) Interest Rate Protection Agreements so long as the aggregate
exposure under all Interest Rate Protection Agreements calculated at the time
any
Interest Rate Protection Agreement is entered into does not exceed $1,000,000;
(k) obligations with respect to foreign exchange hedging contracts
used
to hedge the foreign exchange exposure of the Company and its Foreign
Subsidiaries with
respect to receivables and payables; and
(l) unsecured obligations to insurance companies, sureties or
others with
respect to worker s compensation, employment insurance and other social
security
legislation and with respect to performance bonds and other obligations
described in
Section 9.06(f) hereof in an aggregate amount not exceeding $5,000,000 at any
one time
outstanding.
9.08. Intentionally Omitted..
9.09. Intentionally Omitted.
9.10. Intentionally Omitted.
9.11. Capital Expenditures. The Company will not permit the aggregate
amount
of Capital Expenditures made by the Company and its Domestic Subsidiaries in any
fiscal
year together with the aggregate amount of Capital Lease Obligations incurred by
the
Company and its Domestic Subsidiaries during such period, to exceed
$13,000,000
provided that if the aggregate amount of Capital Expenditures made by the
Company
during any such fiscal year is less than the maximum amount of Capital
Expenditures
permitted hereby (after taking into account any increase in such amount as a
result of
this proviso) for such fiscal year, the amount of Capital Expenditures permitted
for the
succeeding fiscal year shall be increased by such difference to the extent such
difference
does not exceed $10,000,000. Any Capital Lease Obligation incurred in
connection with
a sale and leaseback of the Company s facility located in Oceanport, New Jersey
shall be
excluded from the computations under this Section 9.11.
9.12. Intentionally Omitted.
9.13. Lines of Business. Neither the Company nor any of its
Subsidiaries shall
engage to any substantial extent in any line or lines of business activity other
than the
business engaged in by the Company and its Subsidiaries on the date hereof or
any other
line or lines of business related thereto.
9.14. Intentionally Omitted.
9.15. Intentionally Omitted.
9.16. Certain Obligations Respecting Subsidiaries. The Company will,
and will
cause each of its Subsidiaries to, take such action from time to time as shall
be necessary
to ensure that the Company and each of its Subsidiaries at all times owns at
least the
same percentage of the issued and outstanding shares of each class of stock
of each of its
Subsidiaries as is owned on the Closing Date except to the extent resulting
from
transactions permitted by Section 9.03, 9.05 or 9.24(v) hereof, except as
provided in
clauses (a) and (b) below. Without limiting the generality of the foregoing,
none of the
Company nor any of its Subsidiaries shall sell, transfer or otherwise dispose
of any shares
of stock in any Subsidiary owned by them, nor permit any Subsidiary to issue
any shares
of stock of any class whatsoever to any Person (other than to the Company)
except that
(a) the Company may make investments as long as such investment is permitted by
Section 9.08(f) hereof and (b) the Company may exchange shares of stock in a
Subsidiary
in exchange for Property, provided that in the case of any such investment or
exchange
the Company shall, after giving effect thereto, still own at least 51% of the
stock of such
Subsidiary (or the portion pledged pursuant to the respective Pledge Agreement
in the
case of any Foreign Subsidiary) and such Subsidiary shall remain a Subsidiary
as
defined in Section 1.01 hereof. Except as expressly permitted in this
Agreement, the
Company will, and will cause each of its Subsidiaries to, retain voting control
of each of
its Subsidiaries.
9.17. Intentionally Omitted.
9.18. Intentionally Omitted.
9.19. Intentionally Omitted.
9.20. Leases. The aggregate rental obligations in each fiscal year of
the
Company and its Domestic Subsidiaries under all leases (other than Capital Lease
Obligations) not cancelable without penalty shall not exceed $7,000,000. The
Company
shall, and shall cause each of its Domestic Subsidiaries to, comply in all
material respects
with all material leases under which it is the lessee and diligently enforce its
rights
thereunder, unless, in the judgment of the Company the failure to so comply is
advisable
in connection with the negotiation or renegotiation of any such lease. The
Company will
not incur (and will not permit any Domestic Subsidiary to incur) any Capital
Lease
Obligations other than:
(a) Capital Lease Obligations incurred in any fiscal year that do
not
exceed, in the aggregate, together with the aggregate amount of Capital
Expenditures
made by the Company and its Domestic Subsidiaries during such fiscal year, the
amount
set forth in Section 9.11 hereof for such fiscal year; and
(b) other Capital Lease Obligations consented to by the Majority
Lenders.
9.21. Intentionally Omitted.
9.22. Intentionally Omitted.
9.23. Intentionally Omitted.
9.24. Disposition of Assets. Neither the Company nor any of its
Domestic
Subsidiaries will sell, lease, assign or otherwise transfer or make any other
Disposition of
any of its assets other than:
(i) sales of Inventory, spare parts, demonstration systems and
similar items in the ordinary course of business on ordinary business
terms;
(ii) Dispositions that constitute transactions permitted by
Section
9.08(f) hereof;
(iii) the Disposition of obsolete or worn-out tools,
equipment,
Inventory, spare parts, demonstration systems or similar items or other
Property
no longer used or useful in the business of the Company and its
Subsidiaries;
(iv) the sale of other assets if the aggregate book value of
each
such asset or group of related assets (calculated as of the respective
dates of sale
of such assets or related group of assets) does not exceed $2,000,000;
provided that in no event shall the Company or any such Subsidiary make any
such sale
described in clause (iii) or (iv) above for any consideration other than cash
in an amount
equal to the fair market value of such asset;
(v) Dispositions of the stock of Subsidiaries to the extent
resulting directly from a transaction permitted by Sections 9.03 or
9.05(a) hereof
or as permitted by clauses (a) and (b) of Section 9.16 hereof;
(vi) the sale of the Company s Tinton Falls, New Jersey facility
provided net cash proceeds therefrom equal or exceed $2,500,000;
(vii) the sale and leaseback of the Company s Oceanport, New
Jersey facility provided net cash proceeds therefrom equal or exceed
$10,000,000;
and
(viii) other Dispositions to which the Majority Lenders shall
have
consented.
The Agent shall execute such other releases in connection with Dispositions
permitted hereunder as the Company may reasonably request. Nothing herein shall
prohibit the Disposition by any Foreign Subsidiary of any of its assets.
9.25. Intentionally Omitted.
9.26. Intentionally Omitted.
9.27. Intentionally Omitted.
9.28. Intentionally Omitted.
9.29. Intentionally Omitted.
9.30. Intentionally Omitted.
9.31. Intentionally Omitted.
9.32. Intentionally Omitted.
9.33. Intentionally Omitted.
9.34. Intentionally Omitted.
9.35. Intentionally Omitted.
9.36. Intentionally Omitted.
9.37. Intentionally Omitted.
9.38. Financing Statements, Etc.
Without in any way limiting the obligations of
the Company under the Amended Security Agreement, at the request of the Agent,
the
Company shall (a) execute and deliver to the Agent a UCC-1 Financing Statement
to be
filed in the State of Maryland in form and substance satisfactory to the Agent,
and(b) reimburse the Agent in respect of any
filing fees or taxes paid by the Agent inconnection with such
filing.
Section 10. Specified Events and Events of Default. Each
of the following events shall be a Specified Event :
(a) The Company shall default in the (i) repayment when due of any
L/C Advance or the payment of interest on any L/C Advance or the payment of any
fees
described in Section 3.02(b) when due or (ii) the payment of any other amount
payable
by it hereunder or under any other Basic Document when due, if unremedied for
five (5)
days after notice thereof; or
(b) The Company or any of its Subsidiaries shall default in the
payment
when due of any principal of or interest on any of its other Indebtedness
aggregating
$2,000,000 or more; or any event specified in any note, agreement, indenture or
other
document evidencing or relating to any such Indebtedness aggregating $2,000,000
or
more shall occur if the effect of such event is to cause, or (with the giving of
any notice
or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to
become due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase
or otherwise), prior to its stated maturity (or, in the case of an Interest Rate
Protection
Agreement, to permit the payments owing under such interest Rate Protection
Agreement to be liquidated), provided that no such payment default or event
occurring
with respect to the Indebtedness of any Foreign Subsidiary shall be deemed to
have
occurred for purposes of this paragraph (b) until such default or event shall
have
continued unremedied for 30 days or a related demand for payment under a
Foreign
Guaranty shall have been made; or
(c) Any representation, warranty or certification made or deemed made
in any Basic Document (or in any modification or supplement thereto) by the
Company,
or any certificate furnished to any Lender or the Agent pursuant to the
provisions
thereof, shall prove to have been false or misleading as of the time made or
furnished in
any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 9.01, 9.04, 9.05, 9.06, 9.07, 9.11, 9.16, 9.20
and 9.24,
hereof; or the Company shall default in the performance of any of its
obligations under
Section 4.02 or 5.02 of the Amended Security Agreement or any provisions of the
Mortgage; or the Company shall default in the performance of any of its other
obligations in this Agreement or any other Basic Document and such default shall
continue unremedied for a period of 10 days after notice thereof to the Company
by the
Agent or any Lender (through the Agent); or
(e) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become due;
or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or
liquidator of itself or of all or a substantial part of its Property, (ii) make
a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the
bankruptcy Code (as now or hereafter in effect), (iv) file a petition seeking to
take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up,
or composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case
under the Bankruptcy Code, or (vi) take any corporate action for the purpose of
effecting
any of the foregoing (except, in each case, as contemplated by Section 9.03
hereof with
respect to a Foreign Subsidiary or an inoperative Subsidiary); or
(g) A proceeding or case shall be commenced, without the application
or consent of the Company or any of its Subsidiaries, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the
composition or readjustment of its debts; (ii) the appointment of a trustee,
receiver,
custodian, liquidator or the like of the Company or such Subsidiary or of all or
any
substantial part of its assets, or (iii) similar relief in respect of the
Company or such
Subsidiary under any law relating to bankruptcy, insolvency, reorganization,
winding-up,
or composition or adjustment of debts, and such proceeding or case shall
continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing
shall be entered and continue unstayed and in effect, for a period of 60 or more
days; or
an order for relief against the Company or such Subsidiary shall be entered in
an
involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $2,000,000 in the aggregate (or any individual judgment in excess of
$1,000,000) shall
be rendered by a one or more courts, administrative tribunals or other bodies
having
jurisdiction against the Company and/or any of its Subsidiaries and the same
shall not be
discharged (or provision shall not be made for such discharge), or a stay of
execution
thereof shall not be procured within 30 days from the date of entry thereof and
the
Company or the relevant Subsidiary shall not, within said period of 30 days, or
such
longer period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal; or
(i) An event or condition specified in Section 9.01(e) hereof shall
occur
or exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or
condition, together with all other such events or conditions, the Company or
any ERISA
Affiliate shall incur or in the opinion of the Majority Lenders shall be
reasonably likely to
incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the
foregoing) which would constitute, in the determination of the Majority Lenders,
a
Material Adverse Effect;
(j) Except for expiration in accordance with its terms, any of the
Security Documents shall be terminated or shall cease to be in full force and
effect, for
whatever reason or the Company shall repudiate any of its obligations under any
of the
Basic Documents; or
(k) Any revocation of a building, operating, zoning or occupancy
permit
or approval (or the institution of proceedings seeking such a revocation and
such
proceedings shall not be discontinued with 30 days) shall occur with respect to
the
Company s facilities located in Tinton Falls or Oceanport, New Jersey, or any
destruction,
forfeiture, alienation, Condemnation or taking of a material portion of the
Collateral (as
defined in the Amended Security Agreement) or the Mortgaged Property (as defined
in
the Mortgage) in each case if such revocation or other event could have a
Material
Adverse Effect; or
(l) Any Person (which term, when used in this subsection (l), shall
include any two or more Persons acting as a partnership, limited partnership,
syndicate or
other group for the purpose of acquiring, holding or disposing of securities of
the
Company and any other meaning assigned to it in a successor provision to
Section 13(d)
of the Securities Exchange Act of 1934) is or becomes the beneficial owner
(which term,
when used in this subsection (l), shall include any Person who, directly or
indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares
(i) voting power which includes the power to vote or to direct the voting of
such security;
and/or (ii) investment power which includes the power to dispose or to direct
the
disposition of such security, or such other meaning assigned to it in a
successor provision
to Rule 13d-3 promulgated under the Securities Exchange Act of 1934), directly
or
indirectly, of voting stock (which term, when used in this subsection (l), shall
mean all
capital stock of the Company which by its terms may be voted on all matters
submitted to
stockholders of the Company generally) representing in excess of fifty percent
(50%) of
the votes entitled to be cast by the holders of all then outstanding shares of
the
Company; or
(m) During any period, commencing after the date of this Agreement,
individuals who at the beginning of such period were directors of the Company
(together
with any replacements or additional directors whose nomination for election or
election
was recommended by incumbent management of the Company or recommended or
approved by a majority of the board of directors then in office) cease to
constitute a
majority of the board of directors of the Company.
(n) An Event of Default shall have occurred under, and as defined
in,
the Loan and Security Agreement between the Company and Foothill dated as of
June 29, 1995, as amended, modified, supplemented and/or restated from time to
time.
A Specified Event shall become an Event of Default ( Event of Default ) as
follows: (1) in the case of the occurrence of any Specified Event referred to
in clause (a)
of this Section 10, such Specified Event shall automatically become an Event of
Default if
such Specified Event shall continue unremedied for 10 days; (2) in the case
of a
Specified
Event other than one referred to in clause (a) of this Section 10 or one with
respect to
the Company referred to in clause (f), (g) or (n) of this Section 10, such
Specified Event
shall become an Event of Default if the Agent shall at the direction of the
Majority
Lenders, by notice to the Company, declare such Specified Event to be an Event
of
Default; and (3) in the case of a Specified Event with respect to the Company
referred to
in clause (f), (g) or (n) of this Section 10, such Specified Event shall,
immediately upon
its occurrence, automatically become an Event of Default. Upon: (x) the
occurrence of
an Event of Default as provided above (other than one resulting from the
occurrence of a
Specified Event with respect to the Company referred to in clause (f) or (g)
of this
Section 10), the Agent shall at the direction of the Majority Lenders, by notice
to the
Company, declare all amounts payable by the Company hereunder and under the
other
Basic Documents to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities
of any kind, all of which are hereby expressly waived by the Company; and (y)
upon the
occurrence of an Event of Default resulting from a Specified Event with respect
to the
Company referred to in clause (f), (g) or (n) of this Section 10, all amounts
payable by
the Company hereunder and the other Basic Documents shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities
of any kind, all of which are hereby expressly waived by the Company. Any
Specified
Event or Event of Default waived in writing in accordance with Section 12.04
hereof shall
cease to exist.
Section 11. Acknowledgment of Agency, Etc. Upon any resignation or
replacement of the Agent, the retiring Agent shall give notice thereof to the
Company,
and the successor Agent shall be the Agent for all purposes hereof and under
the other
Basic Documents. The Company acknowledges that nothing in this Section 11 shall
give
it any right to replace, or veto the replacement of, the Agent or to direct the
Agent to
take, or not to take, any action.
Section 12. Miscellaneous.
12.01. Waiver. No failure on the part of the Agent or any Lender to
exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or
privilege under this Agreement or any other Basic Documents shall operate as a
waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this
Agreement or any other Basic Documents preclude any other or further exercise
thereof
or the exercise of any other right, power or privilege, which exercise may be
concurrent
or subsequent to such other exercise. The remedies provided herein are
cumulative and
not exclusive of any remedies provided by law or in equity.
12.02. Notices. All notices and other communications provided for
herein and
under the Security Documents (including, without limitation, any modifications
of, or
waivers or consents under, this Agreement) shall be given or made in writing
(including,
without limitation, by telecopy) delivered to the intended recipient at the
Address for
Notices specified below its name on the signature pages hereof; or, as to any
party, at
such other address as shall be designated by such party in a notice to each
other party.
Except as otherwise provided in this Agreement, all such communications shall
be
deemed to have been duly given when transmitted by telecopier or personally
delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as
aforesaid.
12.03. Expenses, Etc. The Company agrees to pay or reimburse each of
the
Lenders and the Agent for paying: (a) the fees and expenses of the Agent and
the
Lenders described in Section 7.01(q) hereof (whether bills for such fees and
expenses are
delivered to the Company before or after the Closing Date); (b) all reasonable
costs and
expenses of the Lenders (but not of any Participants) and the Agent
(including
reasonable counsels fees) in connection with (i) any amendment, modification or
waiver
of any of the terms of this Agreement or any of the other Basic Documents; (ii)
routine
on-site field examinations of the Company s books and financial records
(provided that
there be no more than four such on-site examinations per year and the amount
the
Company shall be obligated to pay with respect thereto in any year shall not
exceed
$50,000) and additional travel expenses incurred at the request of the Company;
(iii) any
appraisals of real property subject to the Mortgage (provided that the amount
the
Company shall be obligated to pay with respect thereto in any year shall not
exceed
$40,000); (iv) any Default and any enforcement or collection proceedings
resulting
therefrom; and (v) the enforcement of this Section 12.03; (c) all transfer,
stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or
revenue authority in respect of this Agreement or any of the other Basic
Documents or
any other document referred to herein or therein and all costs, expenses,
taxes,
assessments and other charges incurred in connection with any filing,
registration,
recording or perfection of any security interest contemplated by this Agreement
or any
other Basic Document or any other document referred to herein or therein; and
(d) all
costs, expenses and other charges in respect of title insurance procured with
respect to
the Liens created pursuant to the Mortgage.
The Company hereby agrees to indemnify the Agent and each Lender and their
respective directors, officers, employees and agents for, and hold each of them
harmless
against, any and all losses, liabilities, claims, damages or expenses incurred
by any of
them (including any and all losses, liabilities, claims, damages or expenses
incurred by the
Agent to any Lender) arising out of or by reason of any investigation or
litigation or
other proceedings (including any threatened investigation or litigation or
other
proceedings) relating to the extensions of credit hereunder or any actual or
proposed use
by the Company or any of its Subsidiaries of the proceeds of any of the
extensions of
credit hereunder or any violation of Environmental Law, any Environmental Claim,
or
any Release or threatened Release of any Hazardous Material with respect to
the
Mortgaged Property (as defined in the Mortgage), including, without limitation,
the
reasonable fees and disbursements of counsel incurred in connection with any
such
investigation or litigation or other proceedings and any losses, liabilities,
claims, damages,
or expenses arising out of any violation of any Environmental Law, any
Environmental
Claims or any Release or threatened Release of any Hazardous Material which
shall
occur during any period when the Agent or any of the Lenders shall be in
possession of
the Mortgaged Property following the exercise by the Agent or any Lender of any
of its
rights and remedies hereunder or under any of the Security Documents (but
excluding
any such losses, liabilities, claims, damages or expenses incurred by reason of
the gross
negligence or willful misconduct of the Person to be indemnified).
Amounts payable under this Section 12.03 shall be payable 30 days after
receipt of
an invoice with respect thereto.
12.04. Amendments, Etc. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be amended or otherwise modified
only
by an instrument in writing signed by the Company and the Majority Lenders, or
by the
Company and the Agent acting with the consent of the Majority Lenders, and
any
provision of this Agreement may be waived only by an instrument in writing
signed by the
Majority Lenders or by the Agent acting with the consent of the Majority
Lenders;
provided that no amendment, modification or waiver shall, unless by an
instrument signed
by all of the Lenders or by the Agent acting with the consent of all of the
Lenders: (i)
extend the expiry date of any Standby L/C, the date fixed for the repayment of
any L/C
Advance or any fee hereunder, (ii) reduce the amount of any such repayment,
(iii) reduce
the rate at which interest is payable thereon or any fee payable hereunder,
(iv) alter the
terms of Sections 5.07, 9.06, 9.07, 9.10, 9.24 or this Section 12.04, (v) amend
the
definition of the term Majority Lenders , or (vi) amend or waive any of the
conditions
precedent set forth in Section 7 hereof; and provided that any amendment,
waiver or
other modification that affects the rights or obligations of the Agent shall
require the
written consent of the Agent.
12.05. Successors and Assigns. This Agreement shall be binding upon
and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.06. Assignments and Participations.
(a) The Company may not assign its rights or obligations hereunder or
under any other Basic Document without the prior consent of all of the Lenders
and the
Agent; any such assignment made in violation of this Section shall be null and
void.
(b) Each Lender may assign all or any of its L/C Advances to any
Person, provided that if such assignment is a partial assignment, it shall be
in an amount
at least equal to $500,000. Upon execution and delivery by the assignee to the
Company
and the Agent of an instrument in writing pursuant to which such assignee agrees
to
become a Lender hereunder (if not already a Lender) having the L/C Advances
specified in such instrument, and upon receipt by the Agent of a copy of such
instrument,
the assignee shall have, to the extent of such assignment, the obligations,
rights and
benefits of a Lender hereunder holding the L/C Advances (or portions thereof)
assigned
to it (in addition to the L/C Advances, if any, theretofore held by such
assignee). Upon
each such assignment the assigning Lender shall pay the Agent an assignment
fee of
$1,000.
(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any L/C Advances held by it, which purchaser
of a
participation (a Participant ) shall not have any rights or benefits under this
Agreement
or any other Basic Document (the Participant s rights against such Lender in
respect of
such participation to be those set forth in the agreements executed by such
Lender in
favor of the Participant). All amounts payable by the Company to any Lender
under
Section 6 hereof in respect of L/C Advances held by it shall be determined as
if such
Lender had not sold or agreed to sell any Participations in such L/C Advances.
In no
event shall a Lender that sells a participation agree with the Participant to
take or refrain
from taking any action hereunder or under any other Basic Document except that
such
Lender may agree with the Participant that it will not, without the consent of
the
Participant, agree to (i) extend the expiry date of any Standby L/C, the date
fixed for the
repayment of any L/C Advance or the payment of any fee hereunder, (ii) reduce
the
amount of any such repayment, (iii) reduce the rate at which interest is
payable thereon,
or any fee hereunder payable to the Participant, to a level below the rate at
which the
Participant is entitled to receive such interest or fee, or (iv) consent to any
modification,
supplement or waiver of Section 5.07 hereof or the definition of Majority
Lenders .
(d) Intentionally Omitted.
(e) Subject to Section 12.07(g) a Lender may furnish any information
concerning the Company or any of its Subsidiaries in the possession of such
Lender from
time to time to assignees and participants (including prospective assignees and
participants).
(f) The Company shall not have any obligation to pay any expenses
incurred by any Person in connection with any assignment of or participation in
the L/C
Advances.
(g) No Person that becomes a Lender or a Participant shall be
entitled
to any non-public information required to be delivered by the Company hereunder
unless
such Person agrees in writing to keep confidential any such information
designated by the
Company as a trade secret and acknowledges in writing that possession of
non-public
information concerning the Company gives rise to obligations under the Federal
Securities laws.
12.07. Survival. The obligations of the Company under Sections 6.01
and 12.03
hereof and the indemnification obligations of the Lenders under the Amended
Intercreditor Agreement shall survive the expiration of the Standby L/C s or the
repayment of the L/C Advances. In addition, each representation and warranty
made
herein or pursuant hereto shall survive the making of such representation and
warranty,
and no Lender shall be deemed to have waived, by reason of making any extension
of
credit hereunder, any Default which may arise by reason of such representation
or
warranty proving to have been false or misleading, notwithstanding that such
Lender or
the Agent may have had notice or knowledge or reason to believe that such
representation or warranty was false or misleading at the time such extension
of credit
was made.
12.08. Captions. The table of contents and captions and section
headings
appearing herein are included solely for convenience of reference and are not
intended to
affect the interpretation of any provision of this Agreement.
12.09. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
12.10. Governing Law; Submission to Jurisdiction. This Agreement and
the Notes
shall be governed by, and construed in accordance with, the law of The
Commonwealth
of Massachusetts. The Company hereby submits to the nonexclusive jurisdiction
of the
United States District Court for the District of Massachusetts and of any
Massachusetts
state court sitting in Boston for the purposes of all legal proceedings arising
out of or
relating to this Agreement or the transactions contemplated hereby.
The Company
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a
court and any claim that any such proceeding brought in such a court has been
brought
in an inconvenient forum.
12.11. Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND
EACH OF THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.12. No Third Party Beneficiaries. Nothing herein is intended to, or
shall,
confer on any Person (other than the parties hereto and their respective
permitted
successors and assigns) any right or benefit.
12.13. Entire Agreement. This Agreement (including the Schedules and
Exhibits
hereto) together with the other Basic Documents and documents delivered
pursuant to
Section 7 hereof constitute the entire agreement and understanding of the
parties hereto
with respect to the transactions contemplated by this Agreement.
12.14. Severability. If any provision hereof is invalid and
enforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in
favor of the Agent and the Lenders in order to carry out the intentions of the
parties
hereto as nearly as may be possible and (ii) the invalidity or unenforceability
of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CONCURRENT COMPUTER CORPORATION
By:/s/ Kevin J. Dell
Kevin J. Dell
Title: Vice President, General
Counsel and Secretary
Address for Notices:
2 Crescent Place
Oceanport, New Jersey 07757
Telecopier No.: (908) 870-4779
Telephone No.: (908) 870-4500
Attention: Kevin J. Dell, Esq.
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent
By: /S/ Gordon R. Massey
Gordon R. Massey
Title: Vice President
Lending Office:
75 State Street
Boston, Massachusetts 02109
Address for Notices:
75 State Street
Boston, Massachusetts 02109
Telecopier No.: (617) 346-1837
Telephone No.: (617) 346-3203
Attention: Gordon R. Massey
CIBC INC., as Lender
By: /S/ Tom R. Wagner
Tom R. Wagner
Title:
Lending Office:
Embarcadero Center
West Tower
275 Battery Street, Suite 1840
San Francisco, California 94111
Address for Notices:
Embarcadero Center
West Tower
275 Battery Street, Suite 1840
San Francisco, California 94111
Telecopier No.: (415) 399-5761
Telephone No.: (415) 399-5744
Attention: Thomas R. Wagner
FLEET BANK OF MASSACHUSETTS, N.A.,
as Lender
By: /S/ Gordon R. Massey
Gordon R. Massey
Title: Vice President
Lending Office:
75 State Street
Boston, Massachusetts 02109
Address for Notices:
75 State Street
Boston, Massachusetts 02109
Telecopier No.: (617) 346-1837
Telephone No.: (617) 346-3203
Attention: Gordon R. Massey
190781.c5
6/29/95 8:10 pm
EXHIBIT A
[Form of Section 9.01 Compliance Certificate]
CIBC Inc., as Lender
Embarcadero Center
West Tower
275 Battery Street, Suite 1840
San Francisco, CA 94111
Fleet Bank of Massachusetts, N.A., as
Lender and as Agent
75 State Street
Boston, MA 02109
Ladies and Gentlemen:
Pursuant to the provisions of Section 9.01 of that certain Third Amended
and
Restated Credit Agreement dated as of June
29,
1995 (the Credit Agreement ) between
you and Concurrent Computer Corporation, a Delaware corporation (the
Borrower ),
the undersigned hereby certifies as follows:
1. except as heretofore disclosed in a previous Compliance Certificate,
there has been no change (i) in the Borrower s charter documents as
certified to the Lenders and Agent at closing, or (ii) in the
incumbency of the officers of the Borrower whose signatures were
certified to the Lenders and Agent at closing;
2. the undersigned has caused the provisions of the Credit Agreement
to be reviewed and no Default has occurred and is continuing; and
3. any changes in the chief executive office of the Borrower and any
additional places of business and locations of personal property that
have arisen since the last Compliance Certificate are as set forth on
Schedule I attached hereto.
Terms defined in the Credit Agreement and not otherwise expressly defined
herein are used herein with the meanings so defined in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
this 29th day of June, 1995.
By: /S/ Kevin J. Dell
Kevin J. Dell
Vice President, General
Counsel and Secretary
SCHEDULE I
To Compliance Certificate
Change in chief executive office and additional places of business and
locations of personal property as follows:
